What is Management By Objective?

Meaning & Definition

Management By Objective

Management by Objectives (MBO) is a systematic and participative approach to management that focuses on setting and achieving specific organizational goals and objectives. MBO is a management philosophy and process that was first introduced by management theorist Peter Drucker in his 1954 book “The Practice of Management.” The MBO approach is designed to align individual and team goals with overall organizational objectives, improve communication and collaboration, and increase employee motivation and performance.

Key components and principles of Management by Objectives include:

  • Goal Setting

MBO begins with the establishment of clear and specific objectives, goals, and targets for the organization, its departments, teams, and individual employees. These objectives are typically established collaboratively, involving managers and their subordinates in the process.

  • Participation and Involvement

MBO encourages the active participation of employees in goal-setting and decision-making. This involvement helps to create a sense of ownership and commitment to the objectives.

  • Commitment to Objectives

Once objectives are set, there is a strong commitment by employees and managers to achieving them. Objectives become the basis for performance evaluation and rewards.

  • Feedback and Monitoring

The progress toward achieving objectives is monitored and assessed through regular reviews and feedback. This process allows for adjustments and corrective actions as needed.

  • Performance Appraisal

Performance evaluations are tied to the accomplishment of objectives. Employees’ performance is measured and assessed based on the degree to which they have met their assigned objectives.

  • Results-Oriented

MBO emphasizes measuring results and outcomes rather than just activities or processes. Success is determined by whether the objectives are met.

  • Open Communication

Effective communication is a cornerstone of MBO. It encourages open and candid discussions between managers and employees regarding expectations, progress, challenges, and opportunities for improvement.

  • Alignment with Organizational Goals

MBO ensures that individual and team objectives align with the broader goals and strategies of the organization. This alignment helps create a sense of purpose and unity in the pursuit of common goals.

  • Continuous Improvement

The MBO process is dynamic and encourages ongoing learning, improvement, and adaptation to changing circumstances. It is not a one-time exercise but a continuous cycle.

MBO has several benefits, including:

  • Enhanced clarity and focus on organizational goals.
  • Improved communication and collaboration between managers and employees.
  • Increased employee motivation and commitment to achieving objectives.
  • Greater accountability for performance.
  • Better alignment of individual efforts with the organization’s strategic priorities.
  • Opportunities for regular feedback and coaching.

However, the successful implementation of MBO requires commitment from top management, effective communication, and a culture that values goal achievement. Additionally, MBO may not be suitable for all organizations and contexts, and it should be adapted to fit the specific needs and culture of each organization.

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