Management by objectives (MBO) is a management model that focuses on the objectives of the organization by establishing a reference point. Management and employees work together to fulfill the same mission by having clear intentions, open communication and shared objectives. Management by objectives (MBO) is a management model that focuses on the objectives of the organization by establishing a reference point. Before working on the established objectives, managers must determine the objectives of the organization in order to create a potential management that is capable of managing various types of objectives with ease.
The MBO is a management technique for increasing employee participation in planning and control activities. The six steps involved in the MBO process are determining the organization's goals, determining employee objectives, constantly monitoring progress and performance, evaluating performance, providing feedback, and evaluating the performance of the MBO. These wishes must be converted into tangible objectives that can be measured and evaluated, for example, reducing departmental costs by 8 percent, improving service by ensuring that all insurance claims are processed within 72 hours of receiving them, or increasing quality by keeping returns below 0.05 percent of sales. The manager asks what goals they think employees can achieve, in what period of time and with what resources.
The management of the IT company Hewlett-Packard (HP) believes that politics is an important component of its success. This element also opens brainstorming sessions so that managers and employees can solve problems or modify objectives (if possible). Professionals say that the main benefits of the MBO are that it improves employee motivation and commitment and allows better communication between management and employees. Managers monitor the performance of team members during the quarter to identify how each member of the team plans to achieve their personal goal and if they are progressing toward the goal.
Objective management is defined as a management system in which employees and their managers jointly determine specific performance goals, progress toward achieving those goals is reviewed periodically, and rewards are assigned based on this progress. The practical importance of objectives in management can best be seen by summarizing how successful management by objectives works in practice. The main difference between MBO (management by objectives) and MBE (management by exception) is that the MBO is a management tool that designs the objectives that must be pursued. Management by objectives helps improve productivity, as the management team focuses on the important task of reducing costs.
After establishing an acceptable set of objectives for each employee through a collaborative give-and-take process, the employee is asked to play an important role in developing an action plan to achieve these objectives. Management by objectives (also known as management by planning) is the establishment of a management information system (MIS) to compare actual performance and achievements with defined objectives.