Management by Objectives (MBO) is a results-oriented process that focuses on setting and controlling goals. It encourages managers to perform detailed tasks and individual members of the organization to have a greater sense of identification with the company's objectives. With MBO, subordinates are proud to participate in the organization's objectives, as goals are set in consultation with them, making them more challenging than if they were imposed by superiors. This leads to the maximum utilization of human resources, as there is no ambiguity or confusion of roles in the organization.
Furthermore, two-way communication between management and subordinates is improved, which helps to clarify any ambiguity and refine and modify any process or any aspect of the objectives. However, MBO has its drawbacks. Subordinates may be under pressure to get along with management in setting goals and objectives, and these goals can be set unrealistically. Additionally, since the subordinate's performance needs to be reviewed every six months or a year, they tend to focus on their immediate goals without worrying about the company's long-term goals. If the objectives are vague, uncertain and unambiguous, managers may not be in a position to carry out their work successfully. Overall, Management by Objectives (MBO) can be applied to many different fields of business or departments within a company.
When done right, it allows managers to clearly communicate what they expect from employees, and employees feel involved in the process of setting their own goals. 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. By doing so under goal-based management, managers communicate to employees what type of goals to set to support company growth.