Management by Objective (MBO) is a management approach that clearly defines every employee’s goal and sets performance measures with respect to the goals being set. Managers at all levels are made aware of the central goal of the organization and then they work together, as a team, to achieve it. MBO aims to improve the performance of the employees working at all levels in the organization. It binds the whole organization to a central goal.
This, management by objective or MBO, approach was first ever brought up
by Peter Drucker in his book “The Practice of Management”, in 1994. It
was discovered to increase the efficiency in management, which it did to
quite some extent. It aimed to regulate management via objectivity but
instead it did it by enhancing the organizational performance on the
If you are looking forward to enhance your organizational performance or achieve your work goals in a timely manner then MBO is what you are looking for. It provides a faster feedback mechanism by setting short-term goals and therefore keeps the organization going in the right direction by ensuring that all the short-term goals are directing towards that one central objective of the organization. Everyone is supposed to present their own performance objectives, which in turn encourages effective communication throughout the organizational hierarchy. Effective communication throughout the organization is one of the work relationship rules that management by objective or MBO seamlessly covers.
Furthermore, it encourages managers at all levels to make their own decisions and set their own objectives. Employees are given the flexibility to fullfil their responsibilities the way it works best for them. Everyone is given their own area of responsibility and they are supposed to set their own set of objectives in order to fullfil their responsibilities.
Written plans are a crucial part of MBO, everyone is supposed to have a plan in accordance with their objective and their objective should help in getting closer to the organizational goal. These written plans act as a clear guideline through all levels of management.
MBO was a crucial part of management in Hewlett Packard (HP). Since 2009 till modern times, it is known that they followed MBO as part of their management. Managers had to prepare written plans, share them with other managers, coordinate with other managers and develop initiatives to reach the company’s objective. Bill Packard, the founder of HP said, “MBO is the opposite of ‘Management by Control’ - it gives the employees the freedom to prepare a plan of their own and be more productive for the company. It gives them the flexibility to achieve their goals the best possible way for themself”
Another feature of MBO is that it sets some checkpoints. Those checkpoints act as guidelines for performance evaluation and ensure that everyone is going in the right direction. The best part is that the managers set those checkpoints collectively as a team, for them self. It binds the whole organization and allows them to work as a team, be more committed to the self-set goals and be more productive for the company as a whole.
Not to forget, MBO gave us the S.M.A.R.T objective way to manage our organizational issues and gave us the philosophy of ‘what gets measured gets done’.
• S = Specific
• M = Measurable
• A = Achievable
• R = Realistic
• T = Time-bound
According to MBO, your objectives should be all of the above-mentioned things to help you achieve your long-term goal successfully.
To recap, the key features of Management by Objective are;
1. MBO allows you to achieve the long-term central goal by setting short-term objectives.
2. Increases coordination and promotes effective communication between the managers and their subordinates.
3. Keeping the subordinates involved in the management plan/process, keeps them highly motivated and committed towards the goals.
4. MBO requires the whole management team to set some performance guides to keep moving towards the same original purpose/goal. This in turn enhances employee performance.
5. The S.M.A.R.T objective method.
6. It acts as a guideline for performance evaluation and feedback provision. Therefore, we can use this method to increase the whole organizations work performance.