Saturday, 10 June 2017


Management  by  Objectives



17 July 1970

a)  Reduce by 2 days - 6-day time lag in preparation of division cost reduction reports using an agreed upon follow-through system.

b)  Achieve an average age of accounts receivable not to exceed 25 days.

c)  Restrict bad debt losses to less than 3% of reporting non-defence sales.

d)  Improve margin by 15% with same revenues but reduced cost of 30%.

e)  Increase 15% the working cash required in each of three banks at the end of the year by holding inventory levels at 80% capacity.

f)   Complete training of three replacements for key positions in accounting section by next June.

g)  Complete study and construct index of expense trends for all departments for the past 5 years and project anticipated expense of future at annual intervals. Set 10% reduction targets from this projected expense trends.

h)  Collect ten suggested cost –reduction ideas per month from each of six operating managers.

i)   Complete write-up and acceptance of company cost-reduction manual and distribute to all members of management within 2 months.

j)   Install five suggestion boxes in five company locations to collect employee suggestions for cost reduction in their job procedures.

k)  Collect from six operating managers’ long distance telephone call analysis and recommendations for control of number, types, and cost of calls.

l)   Reduce dollar value of cost of returned material credits from an average of $20,000 per month in the preceding year to $15,000 per month in the coming year.

m)  Reduce current debt to tangible net worth position to 35% for proposed creditor portfolio.

n)  Reduce fixed assets to a level not to exceed three-quarters of the tangible net worth in the next 2 years.

o)  Improve profits to payroll margin from 5% to 10% within the next four profit sharing quarters.

a)  Implement proposed system B for processing and expediting the filling of back orders at the rate of 10 per month until 90% of back orders are filled. Reinstate system A when back –order level is reached.

b)  Increase sales revenues of a new product 15% within 12 months by concentrating existing expense levels of promotions in New England.

c)  Increase merchandise turnover in store from 4 to 6 within the current fiscal year.

d)  Hold sales expense this coming year to 5% of total sales while increasing sales manpower 10%.

e)  Secure 100% distribution in markets D,E, & F of district 3.

f)   Convince three wholesalers to introduce new merchandising under a prearranged monthly schedule.

g)  Increase occupancy ratio in hotel rooms from a yearly mean of 65 to 85% while maintaining rate structure.

h)  Complete training program A for all district representatives to assure readiness for distributing product Y at the first of the year.

i)   Reduce average handling time of customer statements by 10%.

j)   Complete painting of ten trucks with new advertising campaign within 1 month.

k)  Complete 75% follow-up calls of new inquiries within 3 days of initial inquiry.

l)   Reduce number of customer complaints on commercial business from 22% to 10% of orders billed. Dollars of settlement should not exceed 5% of total commercial billing.

m)Improve sales per employee to $ 25000 during the next 5-Year profit plan.

n)  Achieve percentages of sales to consumer, industry and government from 20, 28, 52 to 30, 35, and 35 respectively.

o)  Complete a strategy statement within 3 months for giving two new segments of the market brand X image to be introduced next session.


a)  Decrease research effort ratio of feasible marketing ideas to actual marketing products from 10 to 5 within the coming fiscal year.

b)  Complete design and development of new prototype in 14 months within cost of $140,000 without farm-out work to vendors.

c)  Complete product design specification for product M within budgetary period.

d)  Supply three new products to marketing within the coming fiscal year with forecasted sales not less than Rs. 15 million.

e)  Get approval from three departments of production, plans for customer, costs, and schedule within 3 months.

f)   Complete PERT layout for contract B within the pre-budgetary planning schedule.

g)  Complete value analysis job plan for three engineering sections during operating quarter.

h)  Increase diversification program with development and introduction of 5 new products within the small product line.

i)   Complete literature and patent search by end of year for five patentable ideas useful in entering new markets K, L and M.

j)   Reduce research investment pay-out time from 3 to 2 years.

k)  Improve research know-how in section B by increasing Ph.D. Hires by 20%.

l)   Reduce the R&D budget as per cent of net sales from 4.5 to 3.5 in the next 5-year profit plan while maintaining services and new product development.

m)Maintain lead competitor’s position in market with four new product introductions in the next 5 year profit plan.


a)  Reduce frequency of lost time injuries from 21 to 6 million man hours within 6 months of installation of new safety awareness program.

b)  Maintain overtime hours at the level of 5% of scheduled hours while completing emergency work program A.

c)  Reduce cost of pump and engine repairs from $10,000 to $5,000 per year per mechanic.

d)  Maintain a once-a-day contact with all subordinates at their work stations and hold a once-a-month work appraisal meeting in office with all subordinates.

e)  Complete construction of 5,000 sq. ft. 2-story approved addition to existing plan within cost of $45,000 by spring of next year.

f)   Master ten techniques in work simplification as related to machine shop operations through a 6-month by monthly cost reduction meeting for machines shop supervisors.

g)  Reduce clerical labour costs in 3 departments by $50,000 with the installation of a data-processing system whose leasing and operational costs are not to exceed 50% of the projected savings.

h)  Reduce weld rejects of Hy-80 steels from 6% to 3% of all plates in assembly S.

i)   Maintain total heat losses at 5% of total heat transferred when changing from system A to system B.

j)   Deliver 16 units per day for less than $45.00 unit cost to shipping point B.

k)  Reduce inventory lead time from 3 weeks to 2 weeks while maintaining customer services.

l)   Reduce obsolete items and all adjustments to inventory to 6% of commercial sales dollars.

m) Complete master schedule of sales and inventories for fiscal year 19xx to reduce stock –out frequency rate to 2½.

n)  Complete by next year a vendor rating system to maintain price, delivery, and reliability at or below an index established for the past 5-year record.

o)  Achieve for the machine shop a process layout by 19xx to reduce material-handling costs to 22% of manufactured costs.


a)  Select five candidates in the third quartile from 25 trainees successfully completing supervisory training, These candidates to be temporarily appointed for 6 months at the new division.

b)  Reduce cost of recruiting each engineer from Rs. 200 to Rs. 1000 while meeting requisition totals and dates.

c)  Complete preparation for labour negotiations by apprising all management personnel of needed contract changes; hold bi-monthly meetings for discussions and conduct two simulated labour bargaining sessions to gain insights on strategy.

d)  At a cost not to exceed $15,000 conduct a sampling survey of the company’s hiring image in three adjacent labour markets.

e)  Complete for distribution at the end of month x a 20-page, 10 topic industrial relations policy manual for newly hired employees.
f)   Decrease termination rate of clerical employees from 25 to 14 per cent.

g)  Increase outside correspondence answered from 25 to 75 per cent within 24 hours.

h)  Read 12 new books in management by the end of a year at the rate of 1 per month.

i)   Complete course in statistics within the next semester with a grade of B or better.

j)   Set up and validate 5 standards of qualifications for new hourly employees.

k)  Complete within 3 months an attitude survey of labour management relations among all employees within cost of $ 1800.

l)   Reduce frequency of grievances by the end of the year from an annual average of 35 to 20.

m) Complete planning, organization, and installation of an employee suggestion system at the start of next year’s cost-reduction program.

n)  Complete training by December 19xx of 600 supervisors in 2-day seminars on managing by objectives.

o)  Reduce absenteeism record for next year from 8 to 5 per cent.


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