Management By ObjectivesDefined along with Examples

Lisa Borga

Management by objectives is a model of strategic management in which specific objectives are clearly defined and communicated by management to all members of the organization.

According to this theory of management, this will also permit the company to examine its goals and define steps to achieve these goals one objective at a time.

By breaking down goals into manageable objectives, the company can track its progress toward achieving them as well as analyze the contributions of employees.

Management By Objectives Explained

management by objectives

Management by objectives is a model of strategic management intended to boost an organization’s performance.

It does this by setting and communicating clear objectives throughout the organization.

However, in order to accomplish the benefits of this process, it is critical to regularly monitor and evaluate the progress of every member of the organization towards achieving these objectives.

MBO does have a weakness that needs to be considered.

Management by objectives, or as it is sometimes called management by planning, tends to overemphasize the use of goals for achieving objectives.

This can result in poor quality work as employees may rush to meet goals.

Whereas it might be better for a company to have a systematic plan for meeting its goals.

MBO Steps

Here are the steps a company can take to use the management by objectives model.

  • Determine Goals. Management needs to set goals for the company or revise their current goals. The goals management sets should be based on the company’s mission, which in most cases has already been established.
  • Set Objectives. Setting the objectives for the company is a crucial step for companies that want to use the management by objectives model of strategic management. Then, once management sets their objectives, they need to decide how they will meet them. All objectives should be listed, and some employees should have their own objectives. Although, no more than three for any one employee is best. Too many objectives can be confusing.
  • Keep Track of Progress. The company should keep track of the process, as this will help the company to make plans for the future. This helps the company to remain aware of any progress. It can also help the company to see errors in its process and fix them.
  • Analyze the Progress. Management should analyze the company’s performance right from the start using performance metrics. They should also decide what progress they consider necessary for success, as well as what they would consider a failure. If they should fail, they need to determine how to fix the problem.
  • Provide Employee Feedback. It is essential to review employee performance and let them know how they are doing. Then, employees who did a good job should be rewarded to motivate them to continue doing well. Also, employees who did not meet their goals need to determine what they did wrong and find a way to improve their performance.

Benefits and Drawbacks of MBO

management by objectives

There are a number of benefits to management by objective.

One advantage is the feeling of accomplishment employees have if they achieve their goals.

This system also tries to match goals with the skills, strengths, and educational levels of the employees.

When employees are assigned these personalized goals, it helps to make them feel valued by the company.

Additionally, the level of communication tends to be higher between management and employees in companies using MBO.

Furthermore, management has the ability to make goals that will help increase the company’s success.

However, like most management approaches, there are disadvantages to MBO. Management by objective is primarily concerned with targets and goals.

Thus, it tends to fail to pay much attention to other parts of a business, including its culture or involvement in the community.

Management by objectives can also be stressful for employees due to the pressure to meet goals in a specific period of time.

Also, if management becomes too reliant on management by objectives, they may have difficulties with parts of the business that are not covered by MBO.

What Are the Expectations When Using Management by Objectives (MBO)?

Management by objectives is a form of management in which there are clear objectives that are used to measure both the company’s performance and the employees’ performance.

Employees and management agree to these objectives.

Then, the actual performance of the company is compared to the objectives.

This allows managers to see if there are any problems and then work to solve these problems and increase the company’s efficiency.

Who Was the Inventor of the Term MBO?

Peter F. Drucker was the first person to use the term management by objectives (MBO).

He used the term in his book called The Practice of Management.

What Are the Problems Associated With Using MBO?

MBO tends to concentrate on targets or goals and not pay very much attention to the other components of the company, including worker behavior, community involvement, or corporate culture.

How Does MBO Differ From Management by Exception (MBE)?

When management by exception is used, management is only concerned with cases in which standards or objectives are not complied with. Therefore, management does not become involved with workers unless the workers fail to meet proficiency standards.

Key Takeaways

  • Management by objectives is a model of management in which a company defines objectives for the organization and communicates them clearly to every member.
  • Management by objectives makes it possible to define the roles and responsibilities of the members of an organization and act as a yardstick for defining employees’ contributions toward achieving them.
  • Management by objectives has received criticism for its potential to lead employees to achieve predefined goals even at the expense of the company’s overall performance.

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  1. Southern Nazarene University "❚❘ MANAGEMENT BY OBJECTIVES " Publication. August 12, 2022

  2. University of Minnesota "6.4 From Management by Objectives to the Balanced Scorecard" Page 1 . August 12, 2022