Management by Objectives and its Key Concepts

By definition, management by objectives (MBO) is such a personnel management strategy in which employees and managers get together in order to plan strategy, monitor and record the process of achieving goals with respect to a specific time period. The flow of organizational planning and goals starts from the top to bottom across the organization and is transformed into selective personal goals for the members of the organization. This approach/strategy named as Management by Objectives was first introduced by an expert of management named as Peter Drucker. Eventually, the technique went over the world and become common in the early 1960’s. It is also known as Management by results.

In simple words, it is such a management system where specific objectives of the organization are set by the joint cooperation and coordination of the higher authorities such as managers and lower level personnel like employees or subordinates. There is a range of beneficial outcomes that can be easily achieved by implementing Management by Objectives technique across the entire organization. The following are the main three purposes that MBO aims to serve.

1. To achieve improved and greater efficiency by applying systematic procedures.
2. To offer employees with enhanced motivation and a strong commitment by making them to participate in the planning process.
3. Rather than implementing plans for work, it utilizes planning for expected outcomes.

In MBO, all the activities are monitored on a regular basis; for example, periodically review of progress toward set objectives, evaluation of results, and allocation of rewards and bonuses according to the progress. Further, there are five main requirements that objectives should meet in order to offer effective management structure.

1. Objectives should be classified on the basis of importance.
2. Objectives should expressed quantitatively whenever/wherever possible
3. Objectives should be realistic
4. Objectives should comprise consistency as per the policies of the organization
5. Objectives should be compatible with each other

Management by Objectives has been gaining enough popularity since the Guru of Management Peter Drucker highlighted the technique in the hall of management. From early 1950’s to today, there are many organizations that influence, creating a joint cooperation between managers and their subordinates on the basis of MBO. The key concepts of the MBO are defined below to clear the perception of the candidates about the technique.

Management by Objectives Key Concepts

Planning is the central concept of MBO, which pertains that the organization and its members along with their subordinates are not simply reacting quickly to certain issues and events but are moving towards being proactive. It is the requirement of the Management by Objectives that employees set a set of personal goals that should be associated with the organizational goals. Suppose that a civil engineer would like to finish the job that is to finish the infrastructure of any housing division by the time, in such case, completing the infrastructure is the career or personal goal of the engineer, whereas it is also an organizational goal at the same time.

Management by Objectives is such activity that is managed and supervised in order to coordinate the individual’s goals to the work or organizational goals. An individual or personal goal can be termed as a piece of join puzzle that is supposed to fit in the provided place and help to complete the entire puzzle that is an organizational goal in terms of MBO. Usually, the goals are prepared annually and are constantly monitored by the top managers in order to evaluate the progress. The rewards are also offered as per the basis of goal achievement.

Advantages of MBO

There are many various advantages of the MBO. It offers a track to identify, analyze and plan strategies for the accomplishment of specific goals. It is true that if any organization does not know its goals, then it is not capable of achieving them. In short, if the organization wants to earn something, then it must have a specific set of goals. Planning of goal allows an effective, disciplined and reliable approach to achieve the goal. Apart from facilitating, it also works as an informer like it makes the organization to be prepared for possible hurdles that might come in the process of achieving the goal. Goals can be adjusted and assessed easily as they are measurable. When a goal is properly set, monitored and achieved, then the organization will surely avail greater efficiency, enhanced organizational morale and save resources.

Disadvantages of MBO

Partially, MBO also comprises disadvantages that make it relative to other theories in the field of management.  Implementing MBO across the organization require concrete efforts more than just setting goals. It might look easy and simple to set a goal, whereas in certain cases, setting a goal is not necessary. Suppose that the job of an individual is to assemble two pieces of a product on any specific line, so this action does not require setting individual/personal goals as the work does not need it.

A well-known CEO named Rodney Brim, criticized Management by Objectives technique and introduced four major weaknesses of the technique that are stated below.

1. The usual focus is merely on the goal rather than preparing an effective plan capable of being implemented efficiently.
2. The organization always becomes fail to control the environmental factors, which act as a block in the accomplishment of the goal, such as lack of management’s support or less number of resources.
3. Possibly, the organization can also become fail to manage change that may need the modification of the goal or even make it irrelevant.
4. Eventually, the organization may also go off the track or may fail to follow on the goal.