Samacheer Kalvi Class 12 Commerce Solutions Chapter 3 Management By Objectives (MBO) and Management By Exception (MBE)

I. Choose the Correct Answer.

Question 1. ............ System gives full Scope to the Individual Strength and Responsibility.
(a) MBO
(b) MBE
(c) MBM
(d) MBA
Answer: (a) MBO
In simple words: Management By Objectives (MBO) is a system where employees get a lot of freedom to use their skills and take responsibility for their tasks. It encourages them to perform their best.

🎯 Exam Tip: Remember that MBO focuses on setting clear goals and empowering individuals, which ties into giving them full scope and responsibility.

Question 2. Which is the First step in Process of MBO?.
(a) Fixing Key Result Area
(b) Appraisal of Activities
(c) Matching Resources with Activities
(d) Defining Organisational Objectives
Answer: (d) Defining Organisational Objectives
In simple words: The first thing to do in MBO is to clearly decide what the whole company wants to achieve. All other steps follow from these main goals.

🎯 Exam Tip: Always start any management process by clearly defining the overall objectives before breaking them down into smaller parts.

Question 3. ............ keeps Management Alert to Opportunities and Threats by Identifying Critical Problems.
(a) MBA
(b) MBE
(c) MBM
(d) MBO
Answer: (b) MBE
In simple words: Management By Exception (MBE) helps managers quickly spot big problems or chances by only looking at things that are very different from the usual plan. It saves time by not focusing on minor issues.

🎯 Exam Tip: Identify MBE's core function: to highlight deviations that require attention, rather than reviewing every single detail.

Question 4. Delegation of Authority is Easily Done with the Help of ............
(a) MBM
(b) MBE
(c) MBO
(d) MBA
Answer: (c) MBO
In simple words: Giving power to others (delegation) becomes easier with Management By Objectives because goals are set clearly, and people know what they need to achieve. When employees understand their targets, they can be trusted with more responsibility.

🎯 Exam Tip: Relate MBO to empowerment and responsibility. Clear objectives make it safer and more effective to delegate tasks and authority.

II. Very Short Answer Questions.

Question 1. Define-MBO
Answer: MBO, or Management By Objectives, was made popular in the USA by George Odiorne. He described it as a system where senior managers and their teams work together to:

• Find the common goals of the organisation.
• Clearly define what each person is responsible for, based on the expected results.
• Use these defined measures as guidelines for working and for checking how much each person or unit has contributed. MBO helps align individual efforts with overall company goals.

🎯 Exam Tip: When defining MBO, always mention George Odiorne and highlight the collaborative goal-setting and performance measurement aspects.

Question 2. What are the objectives of MBO?
Answer: The main objectives of MBO are:

• To measure and judge how well someone performs their job.
• To connect individual goals with the overall goals of the organisation.
• To encourage and motivate employees to do better. This direct link makes their efforts more meaningful.
• To serve as a tool for controlling and bringing together different parts of the organisation.

🎯 Exam Tip: For objectives questions, use bullet points for clarity. Focus on keywords like 'measure performance', 'relate goals', 'stimulate motivation', and 'control/integration'.

Question 3. Bring out the meaning of MBE.
Answer: Management By Exception (MBE) is a key principle of managerial control that was suggested by early management thinkers. It is based on the idea that trying to control everything leads to controlling nothing effectively. MBE is a business management approach that focuses only on identifying and managing situations that are significantly different from the usual or expected path. This allows managers to focus their attention on the most critical issues.In simple words: MBE means managers only pay attention to big problems or things that go very wrong, instead of checking every small detail. It helps them focus on what truly needs their help.

🎯 Exam Tip: Emphasise that MBE is about focusing on "exceptions" or "deviations from the norm" to improve efficiency in management control.

Question 4. Mention any two advantages of MBO?
Answer: Two advantages of MBO are:

1. The MBO process helps managers better understand their specific role within the entire organisation. They see how their work fits into the bigger picture.
2. Delegation of authority, which is giving decision-making power to others, becomes easier with the help of MBO.

🎯 Exam Tip: When asked for "any two," choose the clearest and most distinct advantages. Understanding one's role and facilitating delegation are strong points of MBO.

Question 5. What is known as KRA?
Answer: Key Result Areas (KRAs) are important areas where a company must perform well to reach its goals.

• KRAs are decided based on the overall objectives of the organisation.
• They are arranged in order of importance, meaning some KRAs are given higher priority.
• KRAs show how strong an organisation is, for example, in terms of its profitability, market position, or ability to innovate.

🎯 Exam Tip: Define KRA clearly and highlight its link to organisational objectives and performance measurement.

Question 3. Explain the various disadvantages of MBO.
Answer: The various disadvantages of MBO are:

• MBO often fails to clearly explain its core ideas and how it works. Many top executives do not fully understand what MBO is, why it is needed, or how people can benefit from it.
• It is a process that takes a lot of time. Senior managers need a lot of time to set up the MBO framework. This also involves significant costs and a lot of paperwork.
• MBO tends to focus only on goals for the short term and often overlooks or does not consider objectives for the long term. This can make a company too focused on immediate results.
• For MBO to work well, the status of employees and their roles must be very clear when setting objectives. However, achieving this clarity is not always possible in the MBO process.
• MBO can be a very inflexible system. Objectives should be able to change with new situations, whether external or internal. If goals are not updated, the planned results may not be achieved.

🎯 Exam Tip: When listing disadvantages, use clear, concise points. Remember to cover aspects like understanding, time, focus (short-term vs. long-term), clarity of roles, and flexibility.

Question 4. Discuss the disadvantages of MBE.
Answer: The disadvantages of MBE are:

1. A major drawback of MBE is that only managers have the power to make truly important decisions. This can make lower-level employees feel unmotivated, as they have little say in critical matters.
2. Additionally, it takes time for important issues and problems to be passed up to managers. Managing employees who do not follow standard procedures can be difficult, and these employees may end up with limited tasks or even lose their jobs.

🎯 Exam Tip: For disadvantages of MBE, focus on the impact on employee morale (demotivation) and potential delays in decision-making or addressing compliance issues.

Additional Important Questions and Answers

I. Choose the Correct Answer.

Question 1. MBO refers to ............
(a) Management By Objective
(b) Management By Officers
(c) Management By Orders
(d) Management By Organisation
Answer: (a) Management By Objective
In simple words: MBO stands for Management By Objectives, which is a way of managing by setting clear goals.

🎯 Exam Tip: Remember the full form of MBO and how it relates to goal setting in management.

Question 2. ............ harmonises the goal of an individual with the organisation's goal.
(a) MBO
(b) MBE
(c) MBA
(d) MBM
Answer: (a) MBO
In simple words: MBO helps make sure that what an individual wants to achieve matches what the company wants to achieve. It brings personal and company goals into line.

🎯 Exam Tip: A key benefit of MBO is its ability to align individual and organisational objectives, creating synergy.

Question 3. It is based on the belief that any attempt to control everything results in controlling nothing.
(a) MBA
(b) MBM
(c) MBO
(d) MBE
Answer: (d) MBE
In simple words: This statement describes MBE (Management By Exception), which suggests that focusing only on important exceptions is more effective than trying to manage every single detail.

🎯 Exam Tip: Connect the idea of 'controlling nothing' to MBE's principle of selective control, where only deviations are managed.

Question 4. KRA refers to ............
(a) Key Result Areas
(c) Known Result Areas
(b) Key Reference Action
(d) Knowledge Resource Aim.
Answer: (a) Key Result Areas
In simple words: KRA stands for Key Result Areas, which are the most important things a person or company needs to do well.

🎯 Exam Tip: Be sure to know the full form for common management acronyms like KRA.

Question 5. "Exception has occured”
(a) MBO
(b) MBE
(c) MBM
(c) Appraisal
Answer: (b) MBE
In simple words: The phrase "exception has occurred" directly relates to Management By Exception (MBE), which focuses on dealing with things that do not follow the usual plan.

🎯 Exam Tip: Understand that MBE's core principle is acting only when results differ significantly from expected outcomes, i.e., when an "exception" occurs.

Question 6. The examples of KRA are ............
(a) profitability
(b) loss
(c) market standing
(d) innovation
Answer: (b) loss
In simple words: KRAs are key *areas* for good performance, but 'loss' is a negative outcome, not an area of focus for improvement. Profitability, market standing, and innovation are examples of positive KRAs.

🎯 Exam Tip: KRAs usually refer to positive areas of performance where results are desired, not negative outcomes like a loss itself.

II. Match the Following

Question 1. Match List I with List II

🎯 Exam Tip: For matching questions, connect each item logically: matching resources with their basis, appraisal with discussion, review with periodicity, and targets with individual objectives.

III. Assertion and Reason

Question 1. Assertion (A): KRA indicates the strength of an organisation. Reason (R): Objectives are expressed in a meaningful manner.
(a) (A) is true (R) is true but (R) is not the correct explanation of (A)
(b) (A) is true (R) is false but (R) is the correct explanation of (A)
(c) (A) and (R) are False.
(d) (A) and (R) are true.
Answer: (a) (A) is true (R) is true but (R) is not the correct explanation of (A)
In simple words: The first statement is true because Key Result Areas (KRAs) show how strong a company is in important areas. The second statement is also true because clear goals (objectives) are always stated in a way that makes sense. However, the reason why objectives are meaningful does not explain why KRAs show a company's strength; they are two separate true statements.

🎯 Exam Tip: For assertion and reason questions, first check if both statements are individually true. Then, determine if the reason directly explains the assertion. If not, even if both are true, the reason is not a correct explanation.

IV. Short Answer Questions

Question 1. What is Appraisal of Activities?
Answer: Appraisal of activities means evaluating the performance of employees against set standards. At the end of a specific period (after objectives are supposed to be achieved), the supervisor and their subordinates should have a discussion. This discussion focuses on how the subordinates performed compared to the expected standards. Based on this appraisal, the supervisor should take any necessary corrective actions to improve future performance. It helps everyone understand what went well and what needs to change.In simple words: Appraisal of activities is when a boss talks to an employee about how well they did their job, comparing it to what was expected. If needed, the boss suggests ways to do better.

🎯 Exam Tip: Define appraisal as a comparison of performance against standards, highlighting the discussion and corrective action aspects.

Question 2. What are the processes involved in MBO?
Answer: The MBO process involves several key steps that work in a continuous cycle to manage and achieve objectives:

1. **Defining Organisational Objectives:** First, the overall goals for the entire organisation are clearly established.
2. **Goal of Each Section:** These large organisational objectives are then broken down into specific goals for each department or section.
3. **Fixing Key Result Areas (KRAs):** Critical areas where performance is necessary for success are identified and specific targets are set.
4. **Setting Subordinates Objectives:** Each individual employee's objectives are defined, aligning with their section's KRAs and goals.
5. **Matching Resources with Objectives:** The necessary resources (people, money, tools) are allocated to help achieve these objectives.
6. **Periodical Review Meeting:** Regular meetings are held to check progress and discuss any issues.
7. **Appraisal of Activities:** Employee performance is formally evaluated against the set objectives.
8. **Reappraisal of Objectives:** Finally, based on the appraisal and changing circumstances, the objectives themselves are reviewed and adjusted for the next cycle. This cyclical nature allows for continuous improvement.

🎯 Exam Tip: List the MBO processes in sequential, numbered order. Emphasize that it's a cycle, starting with objectives and ending with reappraisal, leading back to new objectives.