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Management by Objectives (MBO) Definition, Concept, and Objectives

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18 views3 pages

Management by Objectives (MBO) Definition, Concept, and Objectives

Uploaded by

SuhailShaikh
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Management by Objectives (MBO): Definition, Concept, and Objectives

Introduction: Management by Objectives (MBO) is a strategic management model that aims to align
employees' goals with the overall objectives of an organization. Introduced by Peter Drucker in the
1950s, MBO is a results-oriented process that emphasizes setting clear, measurable goals to ensure that
employees are working towards the same organizational priorities. It helps create a shared
understanding of organizational expectations and allows for greater accountability.

Definition of MBO: Management by Objectives is a performance management approach that involves


defining specific objectives that are agreed upon by both management and employees. These objectives
guide employee actions and performance over a set period. The key principle behind MBO is that when
employees know exactly what is expected of them, they are more motivated to achieve their goals,
leading to improved productivity and efficiency within the organization.

Concept of MBO: The core concept of MBO revolves around collaborative goal setting and systematic
performance review. It operates under the belief that employees are more committed to goals they have
participated in developing. MBO encourages participation, communication, and transparency across all
levels of the organization.

The MBO process typically includes the following steps:

Goal Setting: Management and employees collaboratively set clear, measurable, and achievable goals.
These goals are aligned with the overall objectives of the organization.

Development of Action Plans: Once goals are set, employees and management develop action plans that
outline the specific steps needed to achieve these objectives. This stage also involves identifying the
resources required and potential obstacles.

Monitoring and Evaluation: Regular monitoring of progress is essential to ensure that employees stay on
track. Management provides feedback and makes adjustments to the plan if necessary.

Performance Review: At the end of the period, performance is evaluated against the set objectives. This
review determines whether the goals were met and identifies areas for improvement in future cycles.
Feedback and Rewards: Based on performance, employees receive feedback and recognition for their
efforts. If the objectives were achieved, rewards such as bonuses, promotions, or other incentives may
be offered.

Objectives of MBO: The primary objectives of MBO can be broken down into several key elements:

Aligning Individual and Organizational Goals: One of the main objectives of MBO is to ensure that the
personal goals of employees align with the broader goals of the organization. By doing so, it ensures that
employees’ efforts contribute directly to the success of the company.

Improving Communication: MBO fosters open communication between management and employees.
Regular interactions ensure that employees understand what is expected of them, receive necessary
guidance, and have opportunities to provide input.

Promoting Employee Involvement: MBO promotes a sense of ownership and accountability among
employees by involving them in the goal-setting process. When employees contribute to defining their
objectives, they are more likely to be motivated to achieve them.

Enhancing Accountability: With clearly defined goals and timelines, MBO enhances accountability by
setting specific expectations. Employees are aware of their responsibilities and can be evaluated
objectively based on their performance against the agreed objectives.

Facilitating Performance Evaluation: MBO provides a clear framework for evaluating employee
performance. With predefined criteria, management can objectively measure progress and outcomes,
allowing for fair and transparent performance appraisals.

Encouraging Continuous Improvement: MBO fosters a culture of continuous improvement. As goals are
reviewed and adjusted periodically, the organization can respond to changes in the business
environment and ensure that employees are constantly learning and developing new skills.

Increasing Motivation and Productivity: Setting clear, achievable objectives provides employees with a
sense of direction and purpose. When employees are confident in their role and expectations, they tend
to be more motivated and productive.
Resource Optimization: Through the structured process of planning and monitoring, MBO ensures the
efficient use of resources. By focusing on specific, measurable goals, organizations can better allocate
resources, minimizing waste and improving overall efficiency.

Conclusion: Management by Objectives is a powerful tool for aligning individual performance with the
strategic goals of an organization. By fostering collaboration, accountability, and continuous feedback,
MBO helps create a culture of mutual commitment and productivity. When implemented effectively, it
can drive performance, enhance communication, and support the overall growth and success of an
organization.

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