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. The MBO process revolves around the establishment of organizational objectives and goals of various divisions and subdivisions. This approach was first proposed by Peter Drucker in 1954, and by definition, the goal-based management process shows a personnel management system, where the organization sets, plans, monitors and achieves specific objectives with the mutual cooperation of high and low level employees. The ongoing nature of the MBO process not only responds to the sustained concentration of efforts towards the organization's objectives, but it also helps to modify the objectives to adapt to the changing situation.
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. Management by Objectives (MBO) is a systematic process that includes five main steps. These steps are well-defined and have a clear purpose. Both jointly determine the objectives in the light of the skill level of the employees, the availability of resources, the availability of facilities, etc.
With clear employee duties and objectives, managers can evaluate the tools needed to facilitate the MBO process. The objectives of the organization must be achieved by a number of people, if all people are to be jointly responsible for achieving their overall objectives. The activities carried out under the main objective and the subsidiary objectives are extensively evaluated. An important step in the MBO approach is the monitoring and evaluation of the performance and progress of each employee against the objectives set. While the goal-based management approach is necessary to increase the effectiveness of managers, it is equally essential to monitor the performance and progress of every employee in the organization. In some cases, the preliminary objectives of the organization may be modified or changed in view of the skills, strengths, and weaknesses of subordinates and their objectives.
Then, the superior should discuss with the subordinate about the goals he can achieve, the time frame for them and the necessary resources. Subordinate managers should be informed of the company's overall objectives, planning assumptions, and strategies. For example, managers can evaluate performance to measure various parameters by answering questions such as: What are our goals? What resources do we need? How will we measure success? Once objectives have been determined at various levels, action plans are designed and tasks are assigned among employees. Under Management by Objectives (MBO), performance evaluation is achieved through participation from interested managers. Established for all contributors to an organization including managers, employees, CEO, team leaders, and other contributors; objectives are set unchanged units at each level so that performance of each division, department and individual can be reviewed after a given period.