Management by Objectives (MBO) is a process that helps managers and employees to agree on specific performance objectives and develop a plan to achieve them. It is designed to align objectives across the organization, increase employee engagement, and measure performance. The objectives are set at the beginning of the year and evaluated at the end of the year to determine which goals have been achieved and which have not. MBO is a 6-step process that ensures all employees have objectives set to achieve departmental goals, which in turn are set to achieve the organization's goals.
MBO methods of performance appraisal are results-oriented, meaning they measure employee performance by examining how well predetermined work objectives have been met. Goal-based management is a popular method for setting company goals and defining the participation of each employee. This process assumes that the manager will work hard to achieve their goals, be pushed internally because of this commitment, and be accountable to the organization for doing so. The BARS scale acts as a pattern of predetermined standards and compares an employee's performance against those standards.
It is important that both the superior and subordinate consider the same issues when reviewing the latter's performance. Evaluation is the process of verifying an employee's performance. Startups and small businesses can benefit from MBO as it can make or break their success. Small business owners and managers have a responsibility to guide their employees in pursuing company objectives.
MBO is a performance evaluation method that can work for most small businesses, especially in this era of remote workers. The purpose of MBO is to measure employee progress toward meeting quantitative objectives.