MBOMBO

Management by Objectives (MBO) is a process of agreeing upon objectives within an organization so that management and employees agree to the objectives and understand what they are in the organization.

The term "management by objectives" was first popularized by Peter Drucker in his 1954 book 'The Practice of Management.

Objectives can be set in all domains of activities (production, services, sales, R&D, human resources, finance, information systems etc.).

Some objectives are collective, for a whole department or the whole company, others can be individualized.

Appraise Performance

•Corporate Strategic goals

•Departmental goals

•Individual goals

STEP 1: SET STEP 1: SET GOALSGOALS

STEP 4: APPRAISE STEP 4: APPRAISE OVERALL OVERALL

PERFORMANCEPERFORMANCE

Action Plans

Review Progress &

Take Corrective Action

STEP 2: DEVELOP STEP 2: DEVELOP PLANSPLANS

STEP 3: REVIEW STEP 3: REVIEW PROGRESSPROGRESS

1. Cascading of organizational goals and objectives

2. Specific objectives for each team member

3. Participative decision making

4. Explicit time period

5. Performance evaluation & feedback

In an MBO, good goals are SMART goals:

SS

SS specific U

MM measurable C

WORK WORK AA achievable HAVEHAVE E E

RR result oriented S

TT time-related S

All individuals within an organization are assigned a special set of objectives that they try to reach during a normal operating period. These objectives are mutually set and agreed upon by individuals and their managers.

Performance reviews are conducted periodically to determine how close individuals are to attaining their objectives.

Rewards are given to individuals on the basis of how close they come to reaching their goals.

Improves employee motivationImproves communication in the

organisationFlags up and highlights training needs

required to achieve objectivesImproves overall performance and

efficiencyAttainment of goals can lead to the

satisfaction of Maslow’s higher order needs

May demotivate staff if targets are too high and unrealistic, also if imposed rather than agreed

Requires the cooperation of all employees to succeed

Can be bureaucratic and time consuming (meetings, feedback)

Can encourage short-term rather a more focused long-term growth

Objectives may go out of date and can restrict staff initiative and creativity

Setting targets for certain specialised employees may be difficult

1. Lack of top management commitment and follow through on MBO.

2. Employees’ negative beliefs about management’s sincerity in its efforts to include them in the decision-making process.

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