Management by Objectives

Management by objectives (MBO) is a systematic and organized approach that allows management to focus on achievable goals and to attain the best possible results from available resources. It aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization. (MBO) relies on defining of objectives for each employee and then comparing and directing their performance against the objectives which have been set. It aims to increase organizational performance by aligning goals and subordinate objectives throughout the organisation. Ideally, employees get strong input to identify their objectives, time lines for completion, etc. MBO includes ongoing tracking and feedback in the process to reach objectives.

Concept of MBO was first outlined by Peter Drucker in 1954. According to Drucker managers should avoid ‘Activity Trap’ getting so involved in their day to day activities that they forget their main purpose or objective. Instead of few top managers all the managers should participate in the strategic planning process in order to improve implement ability of the plan. Another concept in MBO is that managers should implement a range of performance system to keep organization on track. Clearly MBO can be seen as predecessor of Value based management.

MBO principles are

i. Cascading of organizational goals and objectives

ii. Specify objectives of each member,

iii. Participative decision making

iv. Explicit time period and

v. Performance evaluation and feedback.

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, tacit knowledge and initiative. Management by Objectives (MBO) is also used by chief executives of multinational corporations (MNCs) for their country managers abroad.