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What Is Management by Objectives (MBO) ?

Management by Objectives (MBO) is a management system where managers and employees jointly develop work objectives and plans. Employees' performance is evaluated based on achieving these agreed-upon objectives. MBO aims to improve performance by aligning individual work with organizational goals and giving employees ownership over their work. It encourages participation, dedication, and loyalty from employees.

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Parth Natani
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19 views

What Is Management by Objectives (MBO) ?

Management by Objectives (MBO) is a management system where managers and employees jointly develop work objectives and plans. Employees' performance is evaluated based on achieving these agreed-upon objectives. MBO aims to improve performance by aligning individual work with organizational goals and giving employees ownership over their work. It encourages participation, dedication, and loyalty from employees.

Uploaded by

Parth Natani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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What is Management By Objectives

(MBO)?
Management by Objective, also
called Management by Results
(MBR), is a theory of management
developed by Peter F. Drucker in his
book Practice of Management (1954)
• MBO is a management system in which the
manager and employees work together to
develop areas of responsibility for
employees.
• It is a control system in which jointly
developed business objectives are made to
align with company goals. Managers and
employees develop plans for achieving these
objectives.
• The standards set forth are used as metrics to
determine an employees performance.
MBO was developed based upon the
belief that employees perform better
when they understand what is
expected of them. It allows the
employee to associate their
individual efforts to the objectives of
the organization.
Further, allowing employees to have
a say in the goal-setting process and
planning function encourages
participation, dedication, and
loyalty among employees while
aligning objectives across the
organization.
• Establishing Goals - Managers work to establish goals that
are based upon the company's mission, vision, and strategic
intent. This is primarily carried out by Managers.

• Establishing Objectives - Objectives are the specific things


Process of
to be achieved in furtherance of the company's goals within a
given time frame. These are developed by managers and
Management
employees working together.
by Objective
• Develop Action Plans - Action plans allow subordinates to
achieve the specifically identified objectives through
coordinated efforts. These action plans are also developed by
managers and employees.
• Appraise Results - Managers measure and appraise the
specific performance of individuals. The appraisal is based
upon effort and progress toward the completion of objectives.
Basically, it compares what is accomplished against what is
expected. There is daily feedback, and the focus is on
rewards rather than punishment. Managers emphasize
Process of
personal growth and development rather than punishment for
failing to meet objectives. Importantly, the managers must
Management
provide continued support and commitment to the employee.
by Objective
• Corrective Action - Managers will use the appraisal result to
take corrective actions. This may include additional efforts to
motivate employees, modifying objectives, plans, or goals
accordingly
The criteria for the defined objectives
include:
Ordered according to the level of
importance

Developing Quantitatively defined

Objectives Realistic or capable of being achieved


or Goals
In accordance with organizational policies

Compatible with other objectives


SPECIFIC
MEASURABLE
S.M.A.R.T
ACHIEVABLE
GOALS
REALISTIC
TIMELY
SPECIFIC

MEASURABLE

S.M.A.R.T.E.R. ACHIEVABLE

GOALS
REALISTIC

TIMELY
EVALUATE
REWARD
Employee Understanding of tasks and duties.

Each employee has Key Result Areas based upon their


individual competencies, knowledge, and experience.
It reducing duplication and confusion in task responsibility
and completion.
The goals of the organization are interrelated across the
completion of individual employee objectives.
Benefits… It lends itself to the open flow of communication within the
organization.
Alignment of effort with organizational strategies

Increased employee focus

Increased employee motivation, empowerment, and job


satisfaction
Management by Objectives works - if you know the objectives.
Ninety percent of the time you don't
Where does the trouble lie???
Volatility. What are the highest and lowest possible values that
we can expect? How fast can these values change? What
amount of change can we absorb before it negatively impacts
us?
Using VUCA can
help leaders Uncertainty. What can change? What are potential signs of
change? Will we know when things change? How fast can we
respond to a change?
manage the ever-
changing modern Complexity. How well do we understand the structures
business involved? How are these items interconnected? What is our
ability to stop a chain reaction or cascading failure?

landscape.
Ambiguity. What is our visibility into the internal and external
factors? What is the possibility for misunderstanding and
confusion? How can directions be issued more clearly? What
signifies that more information is needed before making a
decision?
• Adaptability: VUCA environments require managers who can
swiftly adapt to changes and think on their feet. They should be
open to new ideas and flexible in their approach to problem-

Qualities of a •
solving.
Resilience: Effective managers must be resilient in the face of

Manager in
adversity and setbacks. They should bounce back from failures
and keep their teams motivated during challenging times.
• Strategic Thinking: Managers need to think strategically to

a Dynamic •
anticipate future trends and plan for various
Emotional Intelligence: Managers with high emotional

Environment
intelligence can empathize with their team members, foster
collaboration, and handle stress effectively.
• Innovative Mindset: Encouraging a culture of innovation is vital
in a VUCA world. Effective managers promote creativity,
experimentation, and continuous improvement within their teams.
• Decision-making under Uncertainty: Managers should be
capable of making decisions in situations where complete
information is not available. They need to rely on data, intuition,
and insights to make well-reasoned choices.

Qualities of a
• Effective Communication: Clear and timely communication is
essential to keep the team informed and aligned. Managers should
be skilled communicators, able to convey complex information

Manager in
succinctly.
• Agility: Agile managers can respond quickly to changes and
capitalize on emerging opportunities. They promote an agile work

a Dynamic •
culture that embraces change as a constant.
Collaboration: In a VUCA world, no one person has all the

Environment
answers. Managers who foster collaboration and teamwork can
leverage the diverse expertise of their team to overcome
challenges.
• Continuous Learning: Managers must be lifelong learners who
keep themselves updated with the latest trends and developments
in their industry. This enables them to stay ahead in a rapidly
evolving landscape.

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