The History and Benefits of Management by Objectives

The concept of Management by Objectives (MBO) was first introduced by Peter Drucker in his 1954 book “The Practice of Management”. His student, George Odiorne, further developed the idea in the 1960s and 1970s. This management system has been used successfully in many companies, such as Google, who use the Objectives and Key Results (OKR) method. MBO is a control system in which the jointly developed business objectives are made to align with the company's objectives.

It is beneficial for companies operating at a multinational level, as it can create fewer challenges for administration. Before setting objectives, the central administration conducts a thorough evaluation of the available resources. Once department goals are established, employees work with their managers to set their own individual goals that relate to the organization's goals. A comparison of objectives and actual results will allow managers to judge the performance of subordinates and the top level will similarly evaluate the performance of managers. If this cannot be done or is not desirable, each manager's contributions to the organizational goal should be clearly explained. Sometimes, even well-meaning managers misuse MBO because they lack the interpersonal skills or knowledge of human needs to prevent their assessment sessions from turning into critical and exhausting periods.

If MBO works well for the owner, the owner's own enthusiasm can act infectiously on other managers in the company. To ensure that this system works effectively, it is important to appoint a project manager who can monitor and control the activities of the various departments. Management by Objectives is one of the best management theories in the world today because it allows dialogue and growth between the boss and subordinate with a view to achieving results. It also encourages commitment, desire to contribute and development of management skills. The father of modern corporate management, Peter Drucker, is often considered the world's most influential corporate guru.