What are Management by Objectives(MBO)? | Akrivia HCM

Management by Objectives (MBO) is a philosophy and approach that emphasizes setting specific objectives or goals for employees and aligning their efforts toward achieving them. It was popularized by Peter Drucker in his book “The Practice of Management” in 1954.

MBO involves a collaborative process where managers and employees work together to define objectives that are specific, measurable, achievable, relevant, and time-bound (SMART). These objectives are typically set at various organizational levels, from top-level strategic goals to individual employee goals.

Process of Management by Objectives

The process of Management by Objectives typically involves the following steps:

  1. Goal Setting: The first step is establishing clear and specific objectives or goals aligned with the organization’s strategic goals. These goals should be measurable, realistic, and time-bound. Ideally, managers and employees should set the goals collaboratively to ensure buy-in and commitment.
  2. Cascading Objectives: Once the top-level objectives are defined, they are cascaded down through the organization. Managers and employees at each level are responsible for setting their objectives that contribute to achieving higher-level goals. This ensures alignment and coordination between different levels and functions within the organization.
  3. Monitoring and Review: Regular monitoring and review are essential in the MBO process. Managers should track the progress of employees and teams toward their objectives and provide feedback and guidance as necessary. This monitoring can be done through periodic performance reviews, progress reports, or regular check-ins.
  4. Performance Evaluation: The organization’s performance is compared to its objectives at the end of a specific period. This evaluation assesses whether or not the organization achieved its goals and provides an opportunity to identify areas where additional support may be needed.
  5. Feedback and Rewards: Based on the performance evaluation, feedback is provided to individuals and teams on their achievements and areas for improvement. Positive performance should be recognized and rewarded, while areas for improvement must address through coaching, training, or other developmental interventions.

Advantages and Disadvantages of Management by Objectives

Here are some of the advantages of MBO:

  •  MBO requires regular communication between managers and employees to set goals, track progress, and provide feedback. This can help to improve communication and collaboration within the organization.
  •  MBO helps to clarify individual roles and responsibilities, and it also helps to focus employee efforts on the most important goals. This can lead to increased productivity and efficiency.
  • MBO helps to ensure that employee goals are aligned with the organization’s overall goals. This can help to create a more cohesive and motivated workforce.
  •  MBO can help to improve employee performance by providing clear goals, regular feedback, and development opportunities.

Here are some of the disadvantages of MBO:

  •  MBO can be a time-consuming process, especially for large organizations.
  •  MBO requires a high level of commitment from managers and employees. If not appropriately implemented, MBO can be ineffective.
  •  MBO can focus too much on short-term goals and neglect long-term planning.

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