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Decision Making: SWOT, TWOS & MBO

Md. Ashique Mahmud,


Guest Speaker
BIM.

Shaikh Sajibur Rahman,AMC,BIM.

Strategic Planning

Analyze the current and expected


future situation
Determine the direction of the firm
Develop means for achieving the
mission

Shaikh Sajibur Rahman,AMC,BIM.

SWOT Analysis

!
S

Shaikh Sajibur Rahman,AMC,BIM.

SWOT Analysis
Learning Objectives
What
Analysis?
What is
is SWOT
SWOT Analysis?
Aim of SWOT Analysis
Who needs SWOT Analysis?
How to conduct SWOT Analysis?
Benefits & Pitfalls of SWOT Analysis
Brainstorming & Prioritization in SWOT Analysis
Tips & Exercise for SWOT Analysis

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Shaikh Sajibur Rahman,AMC,BIM.

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What is SWOT Analysis?

Strengths

Oppurtunity

SWOT
Analysis
Threats

Shaikh Sajibur Rahman,AMC,BIM.

Weakness

What is SWOT Analysis?


Acronym for Strengths, Weaknesses, Opportunities,
and Threats. Technique is credited to Albert
Humphrey who led a research project at Stanford
University in the 1960s and 1970s.
Planning tool used to understand Strengths,
Weaknesses, Opportunities, & Threats involved in a
project / business.
.

Used as framework for organizing and using data


and information gained from situation analysis of
internal and external environment.
Technique that enables a group / individual to move
from everyday problems / traditional strategies to a
fresh perspective.
Shaikh Sajibur Rahman,AMC,BIM.

SWOT Analysis

Shaikh Sajibur Rahman,AMC,BIM.

SWOT Analysis
Positive
Internal
Internal
Positive

SW
OT

Shaikh Sajibur Rahman,AMC,BIM.

What is SWOT Analysis?


STRENGTHS

Characteristics of the business or a team that give it an


advantage over others in the industry.
Positive tangible and intangible attribute, internal to an
organization.
Beneficial aspects of the organization or the capabilities
of an organization, which includes human competencies,
process capabilities, financial resources, products and
services, customer goodwill and brand loyalty.
Examples - Abundant financial resources, Well-known
brand name, Economies of scale, Lower costs [raw
materials or processes], Superior management talent,
Better marketing skills, Good distribution skills,
Committed employees.
Shaikh Sajibur Rahman,AMC,BIM.

What is SWOT Analysis?


WEAKNESSES

Characteristics that place the firm at a


disadvantage relative to others.
Detract the organization from its ability to
attain the core goal and influence its
growth.
Weaknesses are the factors which do not
meet the standards we feel they should
meet.
However,
weaknesses
are
controllable. They must be minimized and
eliminated.
Examples - Limited financial resources,
Weak spending on R & D, Very narrow
product line, Limited distribution, Higher
costs, Out-of-date products / technology,
Weak market image, Poor marketing skills,
Limited management skills, Under-trained
employees.
Shaikh Sajibur Rahman,AMC,BIM.

What is SWOT Analysis?


OPPORTUNITIES

Chances to make greater profits in the


environment - External attractive factors that
represent the reason for an organization to
exist &
develop.
Arise
when
an organization can take benefit of
conditions in its environment to plan and
execute strategies that enable it to become
more profitable.
Organization should be careful and recognize the
opportunities and grasp them whenever they
arise. Opportunities may arise from market,
competition,
industry/government
and
technology.
Examples - Rapid market growth, Rival firms are
complacent, Changing customer needs/tastes,
New uses for product discovered, Economic
boom, Government deregulation, Sales decline
for a substitute product .
Shaikh Sajibur Rahman,AMC,BIM.

SWOT ANALYSIS - THREAT


What

is SWOT Analysis?

THREATS

External elements in the environment that


could cause trouble for the business External factors, beyond an organizations
control, which could place the organizations
mission or operation at risk.
Arise
when
conditions
in
external
environment jeopardize the reliability and
profitability of the organizations business.
Compound the vulnerability when they relate
to the weaknesses. Threats are uncontrollable.
When a threat comes, the stability and
survival can be at stake.
Examples - Entry of foreign competitors,
Introduction of new substitute products,
Product life cycle in decline, Changing
customer needs/tastes, Rival firms adopt new
strategies, Increased government regulation,
Shaikh Sajibur Rahman,AMC,BIM.
Economic downturn.

Aim of SWOT Analysis?


To help decision makers
share and compare ideas.

O
O

Shaikh Sajibur Rahman,AMC,BIM.

To
bring
a
clearer
common
purpose
and
understanding of factors
for success.
To organize the important
factors linked to success
and failure in the business
world.
To analyze issues that
have led to failure in the
past.
To provide linearity to the
decision making process
allowing complex ideas to
be
presented
systematically.

Who needs SWOT Analysis?

When the team has not met its


targets
Customer service can be better
Launching a new business unit to
pursue a new business
New team leader is appointed

Business
Unit
Job Holder

Company

When supervisor has issues

When revenue, cost &


with
expense
3
work output
targets are not being
Assigned to a new job
achieved
New financial year fresh
Market share is declining
targets

Industry conditions are


Sajibur Rahman,AMC,BIM.
Job holder seeksShaikh
to improve
unfavorable

Who needs SWOT Analysis?


SWOT Analysis is
also required for /
during...

Changing Jobs

Product
Launch
Decision
Making
Personal Development
Planning
Competitor
Evaluation
Product
Evaluation

Strategic
Planning
Workshop
Sessions

Brainstorming
Meetings

Shaikh Sajibur Rahman,AMC,BIM.

How to conduct SWOT Analysis?

1. Analyse
Internal &
External
Environment

2. Perform SWOT Analysis


3. Prepare Action Plans
& Document

Shaikh Sajibur Rahman,AMC,BIM.

How to conduct SWOT Analysis?


1. Analyse Internal & External
Environment

Shaikh Sajibur Rahman,AMC,BIM.

How to conduct SWOT Analysis?

Shaikh Sajibur Rahman,AMC,BIM.

How to conduct SWOT


Analysis?

2. Perform SWOT Analysis 3. Prepare Action Plans


1. Analyse Internal
& Document
& External
Environment

Shaikh Sajibur Rahman,AMC,BIM.

How to conduct SWOT Analysis?


2. Perform SWOT Analysis & Document
Carry your findings forward - Make sure
that the SWOT analysis is used in subsequent
planning. Revisit your findings at suitable time
intervals.
Evaluate listed ideas against
Objectives - With the lists
compiled, sort and group facts
and ideas in relation to the
objectives.
Create a workshop
environment - Encourage
an atmosphere conducive to
the free flow of information.
Select
contributors Expert opinion may
be required for
SWOT

7
List Strengths,
Weaknesses,
Opportunities, &
threats

Allocate research & information


gathering tasks - Background
preparation can be carried out in two
stages Exploratory and Detailed.
Information on Strengths & Weaknesses
should focus on the internal factors &
information on Opportunities & Threats
Establish the objectives
should focus
on the external factors.
Purpose of conducting a SWOT may
Shaikh Sajibur Rahman,AMC,BIM.
be wide / narrow, general / specific.

How to conduct SWOT Analysis?

1. Analyse Internal2. Perform SWOT Analysis 3. Prepare Action Plans


& Document
& External
Environment

Shaikh Sajibur Rahman,AMC,BIM.

How to conduct SWOT Analysis?


3. Prepare Action
Plan
Once the SWOT analysis has been completed, mark each point
with:
Things that MUST be addressed
immediately
Things that can be handled now
Things that should be researched further
Things that should be planned for the
future

Shaikh Sajibur Rahman,AMC,BIM.

Benefits & Pitfalls of SWOT Analysis


Benefits of SWOT
Analysis
Benefits
of SWOT
Analysis

Knowing the
Competion
Reviews a company's
competitors &
benchmarks against
them to configure
strategies that will put
the company in a
competitive advantage.

Decision Making Tool


Provides well-rounded
information that prompt
well-informed decisions.
Shaikh Sajibur Rahman,AMC,BIM.

Forecasting
Provides a variety of
information critical to
forecasted variables.
Threats, for e.g., can impact
a business's forecast. By
understanding the
company's advantages &
disadvantages, forecasts will
be more accurate.

Benefits & Pitfalls of SWOT Analysis


Benefits of SWOT Analysis
Besides the broad benefits, here are few more benefits of conducting
SWOT Analysis:
Helps in setting of objectives for strategic planning
Provides a framework for identifying & analyzing strengths,
weaknesses, opportunities & threats
Provides an impetus to analyze a situation & develop
suitable strategies and tactics
Basis for assessing core capabilities & competencies
Evidence for, and cultural key to, change

Provides a stimulus to participation in a group experience


Shaikh Sajibur Rahman,AMC,BIM.

Benefits & Pitfalls of SWOT Analysis

Pitfalls of SWOT
Analysis
Can be very subjective. Two people rarely come up with the
same final version of a SWOT. Use it as a guide and not as a
prescription.
May cause organizations to view circumstances as very
simple due to which certain key strategic contact may be
overlooked.
Categorizing aspects as strengths, weaknesses,
opportunities & threats might be very subjective as there is
great degree of uncertainty in market.
To be effective, SWOT needs to be conducted regularly. The
pace of change makes it difficult to anticipate
developments.
The data used in the analysis may be based on assumptions
that subsequently prove to be unfounded [good and bad].
It lacks detailed structure, so key elements may get missed.

Shaikh Sajibur Rahman,AMC,BIM.

Brainstorming & Prioritization in SWOT


Analysis
Brainstormi
Prioritizatio
ng from Brainstorming exercise
n
Output
is Prioritized
Begin brainstorming by asking
the following questions:
What opportunities exist in
our
external environment?
What threats to the institution
exist in
our external environment?
What are the strengths of our
institution?
What are the weaknesses of
our
institution?

At the end of the Brainstorming


exercise:
Reduce the list of strengths &
weaknesses to no more than
five distinctive competencies
and
debilitating weaknesses
Strengths that are distinctive
competencies
Weaknesses that are
debilitating
Reduce threats and
opportunities to the five most
critically important of each.

Shaikh Sajibur Rahman,AMC,BIM.

Tips & Exercise


TIPS
Dos

Donts

Be analytical and specific.

Try to disguise weaknesses.

Record all thoughts and ideas.

Merely list errors and mistakes.

Be selective in the final evaluation.

Lose sight of external influences

Choose the right people for the


exercise.

Allow the SWOT to become a

Choose a suitable SWOT leader or


facilitator.
Think out of the box
Be open to change

and trends.
blame-laying
exercise.
Ignore the outcomes at later stages
of the
planning process.

Shaikh Sajibur Rahman,AMC,BIM.

Tips & Exercise


TIPS

When
conducting a
SWOT
analysis,
designate a
leader or
group
facilitator.

Introduce the
SWOT method
and its purpose
in your
organization to
gain
acceptance.

Be willing to
breakaway from
traditional
methods.

Discuss and
record the results.
Prepare a written
summary of the
SWOT analysis to
give to
participants.

While doing a
SWOT
analysis for
your job,
invite
someone to
Shaikh Sajibur Rahman,AMC,BIM.
brainstorm
with you.

Tips & Exercise


EXAMPLE

Mc Donalds SWOT Analysis

Shaikh Sajibur Rahman,AMC,BIM.

Tips & Exercise


Mc Donalds
SWOT Analysis

INTERNAL

STRENGTHS

Ranks very high on the Fortune


Magazine's most admired list
Community oriented
Global operations all over the world
Cultural diversity in the foods
Excellent location
Assembly line operations.
Use of top quality products

WEAKNESSES

Failing pizza test market thus limiting the

ability to compete with pizza providers.


High training costs due to high turnover.
Minimal concentration on organic foods.
Not much variation in seasonal products .
Quality concerns due to franchised
operations.
Focus on burgers / fried foods not on
OPPORTUNITIES
THREATS
healthier
options for their customers.
Opening more joint ventures.
Marketing strategies that entice
Being more responsive to healthier
people from
options.
small children to adults.
Advertising wifi services in the
Lawsuits for offering unhealthy foods.
branches.
Contamination risks that include the
Expanding on the advertising on being
threat of
e-coli containments.
more socially responsible
The vast amount of fast food
Expansions of business into newly
restaurants that
developed
are open as competition.
EXTERNAL
parts of the world. Shaikh Sajibur Rahman,AMC,BIM.
Focus on healthier dieting by
Open products up to
consumers.

SWOT Analysis Example


Strengths

Weaknesses

Work Experience
Education
Technical Expertise
Transferable Skills
Personal Characteristics
Good networking
contacts
Associations, Business
groups

Opportunities
Positive Trends in Your Field
Enhancing Education
Fields in Need of Your Skills
Geography ability to move
Strengthening Your Network
Utilizing Skills in Different
Way
Enhancing Personal
Development

Lack of Work Experience


Limited Education, Wrong
Major
Limited Technical Knowledge
Lack of Job Knowledge
Weak Interpersonal Skills
Negative Personal
Characteristics

Threats
Negative Trends in Your
Field
Competition in Your Field
Training & Education
Obstacles
Limited Advancement in
Field
Limited Ability to Develop
Limited Positions in Your
Area

Shaikh Sajibur Rahman,AMC,BIM.

Personal SWOT Checklist

Strengths
Technical (Writing,
Programming, Network, Web,
TelCom, etc.)
Soft Skills (Facilitation, Team
Building, Management,
Presentation, Writing, Editing,
Training, etc.)
Industry Knowledge
(Pharmaceutical, Aerospace,
Computer, etc.)
Career (Resume Writing,
Networking Contacts, etc.)
Education (College,
Certifications, Awards, etc.)
Personal Accomplishments
(Published Articles, Books,
Presentations, Honors, etc.)

Weaknesses

Technical (Writing,
Programming, Network, Web,
TelCom, etc.)
Soft Skills (Facilitation, Team
Building, Management,
Presentation, Writing, Editing,
Training, etc.)
Industry Knowledge
(Pharmaceutical, Aerospace,
Computer, etc.)
Career (Resume Writing,
Networking Contacts, etc.)
Education (College,
Certifications, Awards, etc.)
Personal Accomplishments
(Published Articles, Books,
Presentations, Honors, etc.)

Shaikh Sajibur Rahman,AMC,BIM.

Personal SWOT Checklist

Opportunities
Industry Change
Enhance Soft Skills (Facilitation,
Team Building, Management,
Presentation, Writing, Editing,
Training, etc.)
Improve Industry Knowledge
(Pharmaceutical, Aerospace,
Computer, etc.)
Improve Career Skills (Resume
Writing, Networking Contacts,
etc.)
Increase Education (College,
Certifications, Awards, etc.)
Increase Personal
Accomplishments (Published
Articles, Books, Presentations,
Honors, etc.)

Threats

Industry (Trends, New, etc.)


Cost (Training, education,
certifications, etc.)
Time (Needed, Have, etc.)
Jobs (Limitations or dead end in
market or industry, etc.)
Personal (Shyness, Loss of
Contacts, Age, Gender, Fear,
Ability, Preferences, etc.)
Geography (Personal
preference, Relocation Fears,
Cost, Family, etc.)
Companies (Reputation,
Employee Treatment, Position,
etc.)

Shaikh Sajibur Rahman,AMC,BIM.

What Next for You?

Prioritize
Address the Weaknesses
Seize the Opportunities
Avoid/Mitigate the Threats
Strengthen the Strengths

Shaikh Sajibur Rahman,AMC,BIM.

Tips & Exercise


Points to Ponder

Keep your SWOT short and simple, but remember to include


important details. For
example, if you think your communication skills is your strength,
include specific details,
such as verbal / written communication.

When you finish your SWOT analysis, prioritize the results by listing
them in order of the
most significant factors that affect you / your business to the least.

Get multiple perspectives on you / your business for your SWOT


analysis. Ask for input
from your employees, colleagues, friends, suppliers, customers and
partners.

Apply your SWOT analysis to a specific issue, such as a goal you


would like to achieve or
a problem you need Shaikh
to solve.
You
can then conduct separate SWOT
Sajibur
Rahman,AMC,BIM.
analyses on individual

TOWS MATRIX: A MODERN TOOL FOR ANALYSIS OF THE


SITUATION

THREATS

OPPORTUNIT
IES

WEAKNES
S

STRENGHTS

It is a conceptual framework for a systematic analysis that


facilitates matching the external threats and opportunities
with the internal weaknesses and strengths of the
organization.Developed by Heinz Weihrich.

Shaikh Sajibur Rahman,AMC,BIM.

Alternative strategies of TOWS Matrix


The strategies are based on the external environment
and the internal environment:
WT Strategy
WO Strategy
ST Strategy
SO Strategy

Shaikh Sajibur Rahman,AMC,BIM.

TOWS Strategic Alternatives Matrix

Internal Strengths
(S)
1.
2.
3.
4.
Internal Weaknesses (W)
1.
2.
3.
4.

External Opportunities
(O)
1.
2.
3.
4.

External Threats
(T)
1.
2.
3.
4.

SO
"Maxi-Maxi" Strategy
Strategies thatuse
strengthstomaximize
opportunities.

ST
"Maxi-Mini" Strategy
Strategies thatuse
strengthstominimize threats.

WO
"Mini-Maxi" Strategy
Strategies that minimize
weaknesses bytaking
advantage of opportunities.

WT
"Mini-Mini" Strategy
Strategies thatminimize
weaknessesandavoid threats.

Shaikh Sajibur Rahman,AMC,BIM.

1.WT Strategy

It aims to minimize both weaknesses and threats and


may be called the Mini-Mini Strategy.
Eg. Joint ventures, retrench or liquidate

Shaikh Sajibur Rahman,AMC,BIM.

2. WO Strategy

MINI-MAXI.Attempts to minimize the weaknesses and


maximize the opportunities. Thus a firm with weaknesses in
some areas may either develop those areas within the
enterprise or acquire the needed competencies from outside
in order to enable it to take advantage of opportunities in the
external environment.

Shaikh Sajibur Rahman,AMC,BIM.

3. ST Strategy
Maxi-Mini
It is based on using organizations strengths to deal with
threats in the environment.
The aim is to maximize the former while minimizing the
latter.
A company can use its technological, financial, managerial,
or marketing strengths to cope with the threats of a new
product introduced by its competitors.

Shaikh Sajibur Rahman,AMC,BIM.

4. SO Strategy
Maxi-Maxi
Aim of this this strategy is to move from one
position to another.
It capitalizes on a companys strengths to take
advantage of opportunities.
If a company have weaknesses, they will strive to
overcome them, by making them strengths.

Shaikh Sajibur Rahman,AMC,BIM.

Time Dimension and TOWS Matrix

PAST

PRESENT

PRESENT
+T

PRESENT+
T2

TIME
External and internal environments are dynamic

Shaikh Sajibur Rahman,AMC,BIM.

Applications of TOWS Merger Matrix

Mergers
Acquisitions
Joint Ventures
Alliances

Shaikh Sajibur Rahman,AMC,BIM.

TOWS Analysis

TOWS analysis is a variation of SWOT analysis


TOWS is a different arrangement of strengths, weaknesses,
opportunities and threats.
TOWS emphasizes the external environment whilst SWOT
emphasizes the internal environment.
The Analysis results in a SWOT or TOWS Matrix as:
Strengths

Weaknesses

Opportunities

Threats

Shaikh Sajibur Rahman,AMC,BIM.

TOWS Analysis

Identifying Strategic Options like to make most of


strengths, Circumvent weaknesses, Capitalize on
opportunities and Manage threats.
A next step of analysis, usually associated with
the externally-focused TOWS Matrix, helps to
think about the options that one could pursue.

Shaikh Sajibur Rahman,AMC,BIM.

Definition of MBO
Management By Objectives (MBO) can be defined as a
process whereby the employees and the superiors come
together to identify common goals, the employees set their
goals to be achieved, the standards to be taken as the
criteria for measurement of their performance and
contribution and deciding the course of action to be
followed.
Management by Objectives(MBO) is a process of agreeing
uponobjectiveswithin an organization so
thatmanagementandemployeesagree to the objectives
and understand what they are in the organization.

The term "management by objectives" was first popularized


byPeter Druckerin his 1954 book 'The Practice of
Management'

Shaikh Sajibur Rahman,AMC,BIM.

Main Concept

The principle behind Management by Objectives (MBO) is to


make sure that everybody within the organization has a
clear understanding of the aims, or objectives, of that
organization, as well as awareness of their own roles and
responsibilities in achieving those aims.

The complete MBO system is to get managers and


empowered employeesacting to implement and achieve
their plans, which automatically achieve those of the
organization.

Shaikh Sajibur Rahman,AMC,BIM.

The MBO Process

Shaikh Sajibur Rahman,AMC,BIM.

Advantages of MBO

Motivation Involving employees in the whole process of


goal setting. Increasing employee empowerment increases
employee job satisfaction and commitment.
Better communication and Coordination Frequent reviews
and interactions between superiors and subordinates helps
to maintain harmonious relationships within the enterprise
and also solves many problems faced during the period.
The Smart Method

Shaikh Sajibur Rahman,AMC,BIM.

Where to Use MBO

The MBO style is appropriate for knowledge-based


enterprises when your staff is competent. It is appropriate
in situations where you wish to build employees'
management and self-leadership skills and tap their
creativity and initiative.

Management by Objectives (MBO) is also used by chief


executives of multinational corporations (MNCs) for their
country managers abroad.

Shaikh Sajibur Rahman,AMC,BIM.

Core Concepts

According to Drucker managers should "avoid the activity


trap", getting so involved in their day to day activities that
they forget their main purpose or objective. Instead of just
a fewtop managers, all managers should:
Participate in thestrategic planningprocess, in order to
improve the implement ability of the plan, and
Implement a range of performance systems, designed to
help the organization stay on the right track.

Shaikh Sajibur Rahman,AMC,BIM.

MBO in Action at Intel

A Manager's Guide at Intel provides the


following directions.
Start with a few well-chosen overriding
objectives.
Set your subordinates objectives that fit in with
your overriding objectives.
Allow your subordinates to set their own key
results to enable them to meet their objectives.

Shaikh Sajibur Rahman,AMC,BIM.

MBO in Action at Intel

In Management by Objectives systems at Intel, objectives


are written down for each level of the organization, and
individuals are given specific aims and targets.
The principle behind this is to ensure that people know
what the organization is trying to achieve, what their part of
the organization must do to meet those aims, and how, as
individuals, they are expected to help

Shaikh Sajibur Rahman,AMC,BIM.

MBO in Action at Intel

"The one thing an MBO system should provide is focus",


says Andy Grove who ardently practiced MBO at Intel.
So, have yourobjectivesprecise and keep their number
small.
Most people disobey this rule, try to focus on everything,
and end up with no focus at all.

Shaikh Sajibur Rahman,AMC,BIM.

Balance Between Management and


Employee Empowerment
The balance between management and employee
empowerment has to be struck, not by thinkers, but by
practicing managers. Turning their aims into successful
actions, forces managers to master five basic
operations:
Setting objectives
Organizing the group
Motivating and communicating
Measuring performance and
Developing people

Shaikh Sajibur Rahman,AMC,BIM.

Individual Responsibility

Management by Objectives (MBO) creates a link


betweentop
manager'sstrategic
thinkingand
thestrategy's implementation lower down.
Responsibility for objectives is passed from the organization
to its individual members.
It
is
especially
important
for
knowledge-based
organizationswhere all members have to be able to control
their own work by feeding back from their results to their
objectives.

Shaikh Sajibur Rahman,AMC,BIM.

Individual Responsibility

Management by objectives is achieved through selfcontrol, the tool of effectiveness. Today the worker is
aself-manager, whose decisions are of decisive
importance for results.
In such an organization, management has to ask
each employee three questions:
What should we hold you accountable for?
What information do you need?
What information do you owe the rest of us?

Shaikh Sajibur Rahman,AMC,BIM.

MBO: Key Advantages and Disadvantages


Advantages
MBO programs continually emphasize what should be
done in an organization to achieve organizational
goals.
MBO process secures employee commitment to
attaining organizational goals.
Disadvantages
The development of objectives can be time consuming,
leaving both managers and employees less time in
which to do their actual work.

Shaikh Sajibur Rahman,AMC,BIM.

Management by Delegation (MbD)

MdB delegates competencies and responsibilities to people


below in the hierarchie. Task are to be fulfilled on a lower
hierarchical level
Delegation needs decentralisation.
Advantages are
Higher elasticity
Lower working-burdens to the leading managements,
respectively
Higher feeling of responsibility and more fun at work

Al-Qahira, Dec. 2 Dec. 5


2008

Management by Exception (MbE)

Only under exceptional circumstances the management is


involved into the process.
Only if there are exceptionally important decisions to be
taken or
in case of high deviations (Abweichungen) from goals given,
the management acts into the area of responsibility of his
employee.
Comptencies and responsibilities for normal tasks are
delegated to a lower level in hierarchie.

Al-Qahira, Dec. 2 Dec. 5


2008

Management by Exception (MbE)

Management by exception needs:


Clear definitions of and compentencies to tasks delegated
Real delegation of responsibilities for tasks transferred.
Definition on what is routine and what is exceptional.
Definition of tolerance area for deviations from goals clearly
specified.

Al-Qahira, Dec. 2 Dec. 5


2008

Advantages of Management by Exception


There are several valid reasons for using this technique. They
are:
It reduces the amount of financial and operational results that
management must review, which is a more efficient use of their
time.
The report writer linked to the accounting system can be set to
automatically print reports at stated intervals that contain the
predetermined exception levels, which is a minimally-invasive
reporting approach.
This method allows employees to follow their own approaches
to achieving the results mandated in the company's budget.
Management will only step in if exception conditions exist.
The company's auditors will make inquiries about large
Rahman,AMC,BIM.
exceptions as partShaikh
ofSajibur
their
annual audit activities, so

Disadvantages of Management by Exception


There are several issues with the management by exception concept,
which are:
This concept is based on the existence of a budget against which actual
results are compared. If the budget was not well formulated, there may
be a large number of variances, many of which are irrelevant, and which
will waste the time of anyone investigating them.
The concept requires the use of financial analysts who prepare variance
summaries and present this information to management. Thus, an extra
layer of corporate overhead is required to make the concept function
properly. Also, an incompetent analyst might not recognize a potentially
serious issue, and will not bring it to the attention of management.
This concept is based on the command-and-control system, where
conditions are monitored and decisions made by a central group of
senior
managers.
You
could
instead
have
a
decentralized organizational structure, where local managers could
monitor conditions on a daily basis, and so would not need an exception
reporting system.
The concept assumes that only managers can correct variances. If a
business were instead structured so that front line employees could deal
Shaikh Sajibur Rahman,AMC,BIM.
with most variances as soon
as they arise, there would be little need for

WHAT IS MBWA?
Unstructured approach
Involves direct participation by themanagers in the work-related affairs of
their subordinates, in contrast to rigid and distantmanagement.
In MBWApractice, managersspenda significantamountof their time
making informalvisits toworkarea and listening to theemployees.
The purpose of thisexerciseis tocollect qualitative information, listen to
suggestions and complaints, andkeep afingeronthe pulse of the
organization.
Also calledmanagement by wandering around.

If you wait for people to come to you, youll only get small
problems. You must go and find them. The big problems are
where people dont realize they have one in the first place.
W. Edwards Deming
Unstructured approach

to

hands-on,

direct

participation

by

the

managers in the work-related affairs of their subordinates, in


contrast to rigid and distant management. In MBWA practice,
managers spend a significant amount of their time making informal
visits to work area and listening to the employees. The purpose of
this

exercise

is

to

collect

qualitative information,

listen

to

suggestions and complaints, and keep a finger on the pulse of the


organization.

Also

called

management

by

wandering

around.

HOW DID IT START?


In the 1970s, when their company began growing, Bill
Hewlett and Dave Packard created a management style.
This technique was marked by personal involvement, good
listening skills and the recognition that everyone in an
organization wants to do a good job

Top Things About MBWA

1.

In 1978 when Tom Peters first heard of Management by Walking


around, he called it the technology of the obvious.

2.

Considered to be a leadership technique

3.

Japanese managers use a similar strategy called the 3 Gs,


which stand for
Genba

actual place

Genbutsu

actual thing

Genjitsu

actual situation

The 3 Gs originated at Honda.

Guidelines For MBWA

Do it to everyone
Do it as often as you can
Go by yourself
Ask questions
Watch and listen
Share your dreams with them

Management by Exception is a "policy by which


management devotes its time to investigating only those
situations in which actual results differ significantly from
planned results. The idea is that management should
spend its valuable time concentrating on the more
important items (such as shaping the company's future
strategic course). Attention is given only to material
deviations requiring investigation."

Guidelines For MBWA

Try out their work


Bring good news
Have fun
Catch them in the act of doing
something right
Dont be critical

Benefits

Builds trust and relationships.

Motivates staff by suggesting that management takes an


active interest in people.

Encourages staff to achieve individual and collective goals.

Strengthens ability to drive cultural change for higher


organizational performance.

Refreshes organizational values.

Makes work less formal.

Creates a healthy organization.

Why Some Managers Fail?

lack purpose, they seem to walk around the business with no


specific goal in mind other than to walk around their business
dont have a plan, just stopping by the usual people to say hello
are reluctant to be repetitive in their actions and as such are
unwilling to adopt the required leader behaviour
get put off by early disappointments
talk to much and dont listen enough

IS MBWA STILL RELEVANT?

In this era of the www. is there still room for MBWA?


Management by Walking Around is still practiced today. It is
not seen as much in big corporations, but some small
companies practice it. Two big corporations that do practice
it are Hewlett-Packard and Kingston Technologies.

The Return of Management by Walking Around


It is the driving force behind the popular TV reality shows
Undercover Boss, Dirty Jobs.
In Undercover Boss, company executives work in disguise
and undercover in their own firms to explore how the
company really works, what can be improved, and the
challenges faced by employees.
The series Dirty Jobs is just that. Its host performs the
disgusting, smelly, messy and sometimes dangerous jobs that
people do.

Shaikh Sajibur Rahman,AMC,BIM.

Thank
You!

Shaikh Sajibur Rahman,AMC,BIM.

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