Management by Objectives (MBO) is a comprehensive management system that integrates many key management activities into a systematic process and that is consciously directed towards the effective and efficient achievement of organizational and individual objectives. It is a goal-based management and performance evaluation process that is based on a psychology of reward and punishment, which serves to intensify pressure on the individual while offering a limited selection of objectives. Organizations of all types need to follow effective management frameworks to better achieve their individual objectives. This includes regular evaluations of the manager by subordinates, and reviews by the manager's superior.
There are three types of objectives that should be included in MBOs: organizational objectives, individual objectives, and environmental objectives. Organizational objectives are those that are set by the organization as a whole, such as increasing profits or expanding into new markets. Individual objectives are those that are set by each individual employee, such as meeting deadlines or improving customer service. Environmental objectives are those that are set by external factors, such as changes in the economy or new regulations.
The pros of using MBOs include increased motivation and engagement among employees, improved communication between managers and employees, and better alignment between organizational goals and individual goals. The cons include the potential for narrow-mindedness, difficulty in setting measurable goals, and the risk of employees becoming too focused on meeting their own goals rather than the organization's goals. Real-life examples of MBOs include companies setting specific goals for their employees, such as increasing sales or reducing costs. Companies can also use MBOs to measure performance against specific metrics, such as customer satisfaction or employee engagement.
MBOs can be compared to other modern performance management systems, such as Balanced Scorecards or Performance Appraisals. These systems focus on measuring performance against specific metrics, while MBOs focus on setting measurable goals and providing feedback to employees on their progress towards those goals. In conclusion, MBOs provide organizations with an effective way to manage their objectives and ensure that employees are motivated and engaged in achieving those objectives. It is important for managers to be aware of potential complications that may arise when using MBOs, and to ensure that they are not too narrow-minded when setting goals for their employees.