What is Management by Objectives and How Does it Work?

Management by Objectives (MBO) is a process in which a manager and employee come together to agree on specific performance objectives and then develop a plan to achieve them.

Management by objectives

outlines the roles and responsibilities of employees and helps them define their future course of action within the organization. Goal-based management uses the company's main objectives to determine employee objectives. This system 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 approach demonstrates how activity and outcome go hand-in-hand, which can significantly increase productivity. Goal-based management is a system for improving employee performance in which management and employees jointly create objectives. 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. Reliable management information systems are needed to set relevant objectives and monitor their outreach relationship objectively.

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. Efforts become polarized as employees begin to focus only on their own set of objectives rather than focusing on the big picture. The group of management techniques that are based on objectives, with a strong focus on commitment, team motivation and leadership, can be summarized as management methods by objectives. As a result, employees see their own accomplishments as they complete each objective, reinforcing their sense of accomplishment.

Ongoing feedback is complemented by frequent formal evaluation meetings where superiors and subordinates can discuss progress toward goals, leading to greater feedback. Point 7 of Deming's Key Principles encourages managers to abandon objectives in favor of leadership because they considered that a leader with an understanding of systems was more likely to guide workers to an appropriate solution than the incentive of a goal. The key is to be aware of your drawbacks, customize the plan according to your organization, and ensure that everyone is in full agreement and that the objectives are clear and reasonable before starting. The process begins with the definition of specific objectives through a shared debate, and then it is collaboratively decided how to achieve them in sequence. Having a say in goal setting and action plans encourages employee participation and engagement, as well as alignment of objectives across the organization.

Objectives can be set in all domains of activities, such as production, marketing, services, sales, R&D, human resources, finance, and information systems. 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. Setting goals is not only critical for any company's success but also serves a variety of purposes.