Management By Objectives (MBO) A Comprehensive Analysis

Management By
Objectives (MBO): A
Comprehensive Analysis

What is Management by Objectives
(MBO)?
‘Management By Objectives’ is the strategic process of setting organizational goals with
reciprocated responses from both employees and management. The term ‘Management by
Objectives’ was coined by Australian-American management author Peter Drucker in his book
‘The Practice Management’ in 1954.
Management By Objectives is designed by aligning organizational goals with the overall
employee objectives to provide a directive pre-defined conduct to accomplish the vision of the
business in the future.
It is a strategic approach to enhance the efficiency and effectiveness of the organization and
remove any ambiguity.

The MBO process follows a ‘SMART’ approach to set
organizational objectives. The SMART goals include:
S – Specific: It signifies a clearly defined set of goals that are constituted by the organization to assist
employees in functioning with clarity and avoiding complexity. It emphasizes specific goals rather
than generic ones.
M – Measurable: It implies that organizational goals to be framed must be flexible to align with
alterations in the future and should have measurable traits for evaluation.
A – Achievable: It signifies the goals must be attainable. It should be challenging enough, but with
achievable traits.
R – Realistic: It signifies that the goals are expected to be realistically achievable in a given frame of
time with adequate available resources.
T – Time Bound: The goals to be set must be time bound or have deadlines. Having a specified
defined time limit for accomplishments will also avoid work overdue.
Now that we learned about the MBO process, let us discuss the steps involved in the process of
defining specific objectives and framing Management By Objectives and goals.

Steps Of the Management By Objectives
Process
#Step 1: Setting Organizational Objectives
The first and foremost step in the MBO process is to
develop the objectives of the company. Following the
SMART approach, the management of the organization
needs to draft and finalize its goals.
The company goals should comply with its policies and
procedures to avoid any legal or operational issues or
internal conflict. The goals are set to ultimately enhance
the focus of employees.
#Step 2: Aligning Company Objectives with Employees’
Progress
Every employee has their personal objectives, career and
own goals. The project manager needs to align the
company goals with the employees’ personal goals so it
will result in enhancing the organization as well as
employee progress and keep the organization away
from employee turnover.
When the company objectives match the company
culture and the individual goals of employees, it inflates
the employee satisfaction index.
Aligning objectives also heightens the objective standards
and reputation of the organization. Besides, it builds an
image among noteworthy companies for valuing human
resources.

#Step 3: Evaluation of Company Performance
The next in a row is the evaluation of the objectives
from time to time to examine the output and overall
impact of the objectives set for the entire company.
Objectives management is an essential task as the
business trends of companies are dynamic and keep
changing over time according to geographic location,
company size, necessities, available resources,
customer satisfaction and demands, and more.
#Step 4: Monitoring
The succeeding step is to monitor the progress or
degradation of the pre-defined objectives. It is crucial
to monitor the output matrix for making necessary
alterations in case of decline or stagnation and
improvise plans accordingly.
#Step 5: Feedback
Employers should provide feedback to employees to
ascertain their progress and point out the flaws in
execution along with strategic solutions for a clear
understanding of the company’s goals.
It enables them to understand their progress and take
corrective actions if required.
#Step 6: Rewards and Recognition
Last but not the least, employees should be
given performance appraisals, promotions, and more
for positive performance reviews. This would not only
improve the performance of employees but also
escalate their self-motivation to achieve success for
themselves as well as their company.

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