Management by Objectives (MBO)
It was first outlined by Peter Drucker in 1954 in his book ‘The Practice of Management’. It is a systematic and
organised approach that allows management to focus on achievable goals and to attain the best possible results
from available resources.
MBO aims to increase organisational performance by aligning goals and subordinate objectives
throughout the organisation. It managers focus on the result, not the activity. They delegate
tasks by “negotiating a contract of goals” with their subordinates without dictating a detailed
roadmap for implementation. Management by Objectives (MBO) is about setting yourself
objectives and then breaking these down into more specific goals or key results.
Ideally, employees get strong input to identify their objectives, timelines for completion, etc. MBO
includes ongoing tracking and feedback in the process to reach objectives.
According to Drucker managers should “avoid the activity trap”, getting so involved in their
day to day activities that they forget their main purpose or objective. Instead of just a few top
managers, all managers should:
1. participate in the strategic planning process, in order to improve the implementability of
the plan, and
2. implement a range of performance systems, designed to help the organisation stay on the
right track.
Setting Objectives
In Management by Objectives (MBO) systems, objectives are written down for each level of the
organisation, and individuals are given specific aims and targets. “The principle behind this is
to ensure that people know what the organisation is trying to achieve, what their part of the
organisation must do to meet those aims, and how, as individuals, they are expected to help.
This presupposes that organisation’s programs and methods have been fully considered. If they
have not, start by constructing team objectives and ask team members to share in the process.”
For Management by Objectives (MBO) to be effective, individual managers must understand the
specific objectives of their job and how those objectives fit in with the overall company objectives
set by the board of directors. “A manager’s job should be based on a task to be performed in
order to attain the company’s objectives... the manager should be directed and controlled by the
objectives of performance rather than by his boss.”
Process of MBO
1)Defining the Goal
Any MBO programme must start with an absolute enthusiastic support of top management. It
must be consistent with the philosophy of the management. The long-term goals of the
organisation must be outlined initially, like: What is the basic purpose of the organisation?
What business are we in and why? What are the long-term prospects in other areas? After these
long-term goals are established, management must be concerned with determining specific
objectives to be achieved within a given time capsule.
Goal setting is a powerful way of motivating people. Goals provide a clear idea of what we are
trying to achieve. Goals allow us to measure our progress. We are able to plan what we need to
do to achieve these goals through people, time, resources etc. Keeping all this in mind
companies should set SMART goals. S - Specific, M - Measurable, A - Achievable, R - Realistic and
T - Time-based.
2)Action Plan
The action plan is the means by which an objective is achieved. The action plan gives direction
and ensures unity of purpose to organisational activities. It will state in detail, exactly what is to
It was first outlined by Peter Drucker in 1954 in his book ‘The Practice of Management’. It is a systematic and
organised approach that allows management to focus on achievable goals and to attain the best possible results
from available resources.
MBO aims to increase organisational performance by aligning goals and subordinate objectives
throughout the organisation. It managers focus on the result, not the activity. They delegate
tasks by “negotiating a contract of goals” with their subordinates without dictating a detailed
roadmap for implementation. Management by Objectives (MBO) is about setting yourself
objectives and then breaking these down into more specific goals or key results.
Ideally, employees get strong input to identify their objectives, timelines for completion, etc. MBO
includes ongoing tracking and feedback in the process to reach objectives.
According to Drucker managers should “avoid the activity trap”, getting so involved in their
day to day activities that they forget their main purpose or objective. Instead of just a few top
managers, all managers should:
1. participate in the strategic planning process, in order to improve the implementability of
the plan, and
2. implement a range of performance systems, designed to help the organisation stay on the
right track.
Setting Objectives
In Management by Objectives (MBO) systems, objectives are written down for each level of the
organisation, and individuals are given specific aims and targets. “The principle behind this is
to ensure that people know what the organisation is trying to achieve, what their part of the
organisation must do to meet those aims, and how, as individuals, they are expected to help.
This presupposes that organisation’s programs and methods have been fully considered. If they
have not, start by constructing team objectives and ask team members to share in the process.”
For Management by Objectives (MBO) to be effective, individual managers must understand the
specific objectives of their job and how those objectives fit in with the overall company objectives
set by the board of directors. “A manager’s job should be based on a task to be performed in
order to attain the company’s objectives... the manager should be directed and controlled by the
objectives of performance rather than by his boss.”
Process of MBO
1)Defining the Goal
Any MBO programme must start with an absolute enthusiastic support of top management. It
must be consistent with the philosophy of the management. The long-term goals of the
organisation must be outlined initially, like: What is the basic purpose of the organisation?
What business are we in and why? What are the long-term prospects in other areas? After these
long-term goals are established, management must be concerned with determining specific
objectives to be achieved within a given time capsule.
Goal setting is a powerful way of motivating people. Goals provide a clear idea of what we are
trying to achieve. Goals allow us to measure our progress. We are able to plan what we need to
do to achieve these goals through people, time, resources etc. Keeping all this in mind
companies should set SMART goals. S - Specific, M - Measurable, A - Achievable, R - Realistic and
T - Time-based.
2)Action Plan
The action plan is the means by which an objective is achieved. The action plan gives direction
and ensures unity of purpose to organisational activities. It will state in detail, exactly what is to
