Management by Objectives (MBO) is a strategic approach to improving an organization's performance. 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. This goal-based management model is based on the principle that the effectiveness of a company is a skill more important than its efficiency, causing management to focus on performance quality rather than speed. The MBO process consists of five steps that aim to improve performance. The theory of management by objectives was first described by Peter Drucker in 1954 in his book The Practice of Management.
This original scheme was further developed throughout the fifties and seventies, which was also the time frame in which it was most frequently used. Douglas MacGregor, one of the model's later developers, insisted that MBO as a system was better at helping a company's managers more effectively evaluate their subordinates. Every aspect of a company, from human resources to marketing, sales, information technology and everything in between, can benefit from setting clear objectives in areas where the company may currently fall short. Management by objectives is a strategic model used by organizations to clearly delineate the specific objectives and main goals of the company agreed by both management and employees. The goal is to create cohesive communication between all partners within a company, from management to employees.
Management teams should be careful not to become too narrow-minded when using MBO and stay alert to potential complications that may arise. Within this frame of reference, report managers can be asked how much their units plan to contribute to achieving that goal, or they can be asked to set their own goals relatively independent of the corporate goal. A manager is rarely in a position to judge the overall performance of a superior, but he can assess how well the manager has helped the manager perform the job, how well the superior is helping to increase the manager's competence and visibility, what problems the superior poses to the manager, and what types of support the manager poses top can use. A person can do excellent work according to objective measurement standards, but can fail miserably as a partner, subordinate, superior or colleague. If this sounds like something you'd like to try, you might be wondering what are some examples of goals you could set. Along with performance evaluation, organizations need to follow effective management frameworks to better achieve their individual objectives.
While specific objectives may differ depending on the specific industry, product, and company, there are some general objectives you can start with. These include creating one to three goals that you can achieve in the long term; improving communication between all partners within a company; increasing employee competence and visibility; and providing support for employees. 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 accomplish the same mission by having clear intentions, open communication and shared objectives. Each MBO and evaluation programs should include periodic evaluations of the manager by subordinates, and be reviewed by the manager's manager's manager. Final Thoughts Although goal-based management is a bit dated, it can serve as a great cornerstone and a tool within a larger toolset for many companies looking to improve their management style.
MBO focuses on objectives and preparing employees for high productivity and success. Senior management should be aware of potential complications that may arise when using MBO and stay alert for any issues that may arise. If a person's most powerful driving force is made up of personal needs, desires, and aspirations combined with a pressing desire to look good before their own eyes to achieve those deeply rooted personal goals, then goal-based management must begin with your goals. Management teams should be careful not to become too narrow-minded when using MBO and stay alert for any potential complications that may arise.