Management by Objectives (MBO) is a strategic business model designed to improve the performance of an organization. It is a strategy with clearly defined objectives that are agreed upon by both management and employees. This process allows for a manager and employee to come together and develop a plan to achieve their goals. The organization also takes into account environmental factors that could hinder the achievement of these objectives, such as lack of resources or administrative support.
Goal management is similar to MBO, but it allows the manager to choose from a limited range of options. This is beneficial for organizations that have managers who joined because of its reputation for high quality and good service. With this approach, managers are free to evaluate themselves based on what needs to be done, rather than having to be constantly defensive and aware of the organization's interests. The concept of Management by Objectives was first introduced by Peter Drucker in his 1954 book The Practice of Management.
It helps subordinates inform their managers and understand it better, since their assigned work is mutually decided. Each manager should receive specific compensation for how well they develop people, based on those evaluations. The goal-based management approach is necessary to increase the effectiveness of managers, but it is also essential to monitor the performance and progress of every employee in the organization. Reliable management information systems are needed to set relevant objectives and monitor their outreach relationship objectively.
It provides organizations with a process, and many professionals claim that MBO success depends on the support of senior management, clearly defined objectives, and the trained managers who can implement it. 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. 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. This helps managers understand why something hasn't been done if they ask. Given the advantages of MBO, it's clear how it can help managers and employees create a symbiotic working relationship that helps grow the organization.
It allows for greater freedom in evaluating performance, as well as providing compensation for those who develop people well. Additionally, reliable management information systems are needed to set relevant objectives and monitor their outreach relationship objectively.