Management by objectives (MBO) is a strategic approach to improving an organization's performance. It is a process in which the objectives of the organization are defined and transmitted by management to the members of the organization with the intention of achieving each objective. Goal-based management uses the company's main objectives to determine employee objectives. This allows all members of the company to see what they have achieved in relation to the company's main objectives and priorities while performing tasks.
This shows how activity and outcome go together and can dramatically increase productivity. Organizations of all types need to follow effective management frameworks to better achieve their individual objectives. Management by objectives is one of those frameworks that aims to create cohesive communication between all partners within a company, from management to employees. The MBO process consists of five steps that aim to improve performance. The theory of management by objectives was first described by Peter Drucker in 1954 in his book The Practice of Management. This original scheme was further developed throughout the fifties and seventies, which was also the time frame in which it was most frequently used.
The goal-based management model is based on the principle that the effectiveness of a company is a skill more important than its efficiency. This causes management to focus on performance quality rather than speed. One of the model's later developers, Douglas MacGregor, insisted that MBO as a system was better at helping a company's managers more effectively evaluate their subordinates. However, others argue that when MBO is used as a tool within a broader and more comprehensive management plan, it can go a long way in simplifying management and optimizing it for greater efficiency. The less time spent per customer and fewer calls, the better the customer service manager will meet his goals.
The principles described have the potential to function as solid tools within a broader scope of knowledge about management styles. Once you've completed an objective or step, meet with your team to discuss how you were able to achieve that goal and how to continue making progress. The main idea of MBO is to identify the few key objectives that people must work towards to achieve. With knowledge workers, results are not so easily measured and, therefore, the development of new management techniques is required. Putting managers' personal goals first does not minimize the importance of the organization's objectives. The very phrase “inform” reflects the fact that, although a manager has a responsibility, the manager also has a responsibility for what he does and how it is done.
By comparing actual productivity to a given set of standards, managers can identify problem areas and improve efficiency. The objectives set by high-level managers are based on an analysis of what the organization can and should achieve within a specific period of time. Once employees are informed of the overall objectives, plan, and strategies to follow, managers can begin working with their subordinates to establish their personal goals. Goal-based management and performance evaluation processes, as commonly practiced, are inherently counterproductive in the long term because they are based on a psychology of reward and punishment that serves to intensify pressure on the individual while offering a very limited selection of objectives. Theoretically, having a say in goal setting and action plans encourages employee participation and engagement, as well as alignment of objectives across the organization. Another reason is that often, when senior management sets goals, they are not aware of significant barriers to achievement, which makes managers cynical. If you're working with a team, make sure to tell them the steps to ensure everyone can work toward the same goals.
When organizations fail to properly establish, agree on, and manage this approach, egocentric employees may be prone to distorting results, falsely representing the achievement of goals that were set in the short term and in a limited way. Management by Objectives (MBO) is an effective tool for improving organizational performance when used as part of an overall strategy for success. It allows all members of an organization to understand their role in achieving organizational goals while providing clear direction for employees on how they can contribute towards those goals. Additionally, MBO encourages employee participation in goal setting and action plans which helps align objectives across an organization. When used correctly, MBO can help organizations become more efficient by identifying problem areas and improving performance quality over speed. However, it is important for organizations not to become too narrow-minded when using MBO as there may be potential complications that arise from its use.
Ultimately, MBO is an effective tool for improving organizational performance when used as part of an overall strategy for success.