Management by Objectives. SMART
(Drucker)

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Defining objectives for employees and directing their performance against these objectives. Explanation of Management by Objectives of Peter Drucker. ('54). SMART.

What is Management by Objectives? Description

MBO relies on the defining of objectives for each employee and then to compare and to direct their performance against the objectives which have been set. It aims to increase the performance of the organization by matching organizational goals with the objectives of subordinates throughout the organization. Ideally, employees receive strong input to identify their objectives, time lines for completion, etc.
MBO includes continuous tracking of the processes and providing feedback to reach the objectives.

Peter Drucker

Management by Objectives was first outlined by Peter Drucker in 1954 in his book 'The practice of Management'. 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. One of the concepts of MBO was that instead of just a few top-managers, all managers of a firm should participate in the strategic planning process, in order to improve the implementability of the plan. Another concept of Management by Objectives was, that managers should implement a range of performance systems, which are designed to help the organization to function well. Clearly, Management by Objectives can thus be seen as a predecessor of Value Based Management.

Principles of Management by Objectives

Cascading of organizational goals and objectives,
Specific objectives for each member,
Participative decision making,
Explicit time period, and
Performance evaluation and provide feedback.

Management by Objectives also introduced the SMART method for checking the validity of the objectives, which should be 'SMART':

Specific
Measurable
Achievable
Realistic, and
Time-related.

In the 90s, Peter Drucker put the significance of this organization management method into perspective, when he said: "It's just another tool. It is not the great cure for management inefficiency... Management by Objectives works if you know the objectives, 90% of the time you don't."

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Recent User Comments

    			 
             Muliathy Briany - Indonesia
  	       
  		     Does MBO Work in a Church?
  	  		 "I find a lot of problems in church as a pure non profit organization. There is no a clear vision. There are not measurable objectives.

How can I implement MBO in church?"
  			   
    	  		 0

    			 
             Indra Tjahja - Indonesia
  	       
  		     When Management By Objectives
  	  		 "MBO is applicable in the right situation / circumstances only: in small and middle business scale. My experience is not really good when I was CEO for a big company with over 3,000 workers with heterogene skill levels."
  			   
    	  		 1

    			 
             John Troughton - Australia
  	       
  		     Drucker Concepts
  	  		 "Drucker rightly identidied the need for strategy and objectives but did not pursue how to turne objectives into actions. We have."
  			   
    	  		 3

    			 
  			   Garvita - India
  	       
  		     MBO - Significance for Employees?
  	  		 "How is Management By Objectives important for an employee?"
  			   
    	  		 10

    			 
  			   Amey - India
  	       
  		     How to Implement Management By Objectives?
  	  		 "How should one implement management by objectives?"
  			   
    	  		 6

Best User Comments

    			   
    			     Ana - UK
  	         
  				   Reference of SMART Goals
  				   "Does anyone know the reference for SMART goals? 
I checked in Peter Drucker’s book: “The practice of management” and did not find it.
Is really Peter Drucker who invented this acronym?
Thank you,"
    			   
        	  		 51

    			   
    			     Robert - Ireland
  	         
  				   Disadvantages of MBO?
  				   "I'm trying to build a complete list of all disadvantages of Management by Objectives:
1. May lead to suboptimalization: people or departments are not stimulated to look beyond their own objectives and help eachother.
2. Innovation is not stimulated.
3. The time and paperwork involved.
4. Potential misuse by superiors who simply assign (rather than negotiate) objectives.
5. Subordinates may try to negotiate easy goals.
6. Watch out for unrealistic (too high) expectations about what can be reasonably accomplished.
7. Inflexible, rigid."
    			   
        	  		 48

    			   
    			     Heylen - Belgium
  	         
  				   Essence of MBO
  				   "MBO somewhat resembles farming, each animal or plant is allowed to individually produce a product. The farmer is there to give guidance, to control and support the process. Whatever you can imagine for a farmer to do wrong, actually also applies to managers applying MBO. This includes negligance through abdication of authority, failing logistical support, lack of forecasting future demand, etc."
    			   
        	  		 45

    			   
    			     Amit Srivastava - India
  	         
  				   SMART Management Works!
  				   "A very nice article. Organizations transcend from good to great because people use SMART goals as foundation for every day work and strive every day to beat the goals."
    			   
        	  		 39

    			   
    			     Frank - Netherlands
  	         
  				   SMARTIE!
  				   "We often use 2 extra terms: Inspiring en Enthousiasm. It puts the word SMART into another perspective. If your people don´t accept the objectives, it won´t work...."
    			   
        	  		 19

    			   
    			     Helen - Ireland
  	         
  				   Setting SMART Objectives
  				   "What would be the best SMART objectives to set for the  first-line manager, who just started on the job in the retail industry in the current economic crisis"
    			   
        	  		 9

    			   
    			     Arsen Osipov - Russia
  	         
  				   Achievable vs. Realistic
  				   "I don`t see much difference between the terms "Achievable" and "Realistic", I`d rather say "Results-oriented" or "Results-directed"."
    			   
        	  		 9

    			   
                 Ahmad Altarawneh - UAE
  	         
  				   Management By Objectives Examples
  				   "Can anyone give some examples of organizations using MBO Successfuly today?"
    			   
        	  		 5

    			   
    			     Prakash Sewsagur - Mauritius
  	         
  				   SMARTER than SMART
  				   "From my experience, I would write smarter now instead of only smart as Endurane & Responsiveness are both  of great importance."
    			   
        	  		 5

    			   
                 Rameshwer Rao - India
  	         
  				   MBO and Clear Objectives
  				   "MBO gives clear direction to an employee what he is paid to do.... Under SMART whatever you do beyond set objectives goes in vain... Clearly defined objectives will be a greater use to him to avoid this. The million dollar question here is, how many of us work with clearly defined objectives???"
    			   
        	  		 4

    			   
    			     Gabriel - Nigeria
  	         
  				   MBO vs. CSA
  				   "In the principle of Management By Objective, MBO, just like Facilitated Team Workshop in Control Self Assessment, CSA, points out the importance of involvement of employees in decision making.

This makes the employees feel like they are part of the system. They will assume the processes as theirs and they will be better equipped to give qualitative feedback to the managers or supervisors."
    			   
        	  		 3

    			   
    			     Nirbhay Singh - India
  	         
  				   MBO Needs Tracking and Feedback
  				   "I would like to dedicate my opinion on MBO. It aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization. MBO includes ongoing tracking and feedback in the process to reach objectives, employees get strong input to identifying their objectives, time lines for completion etc..."
    			   
        	  		 1

    			   
    			     Vamsee Godavarthy - India
  	         
  				   Smart is Always Smart...
  				   "This is called you define your objectives... Though the implementation is tough.. The results are far from your imagination... Thats how they say... "good things don't come easily" - good to read it here."
    			   
        	  		 0

    			   
    			     Raphael - Cameroon
  	         
  				   Management Without Objectives?
  				   "Is it even possible to manage without objectives? Even when we don't seem to detect clearly the objectives of a particular management, there must be some kind of objective. In this way, we are tempted to ask what's new in  Drucker's MBO, if not simply clarifying the concept."
    			   
        	  		 0

    			   
    			     Chipo - Zimbabwe
  	         
  				   Circumstances for MBO
  				   "Does MBO work in times of uncertainity and change?"
    			   
        	  		 0

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└► Editor (Netherlands)	MBO in Church	"WHY do you want to to implement MBO in a church?"
└► Muliathy Briany (Indonesia)	Is is Possible?	"I think MBO can be implemented in a non-profit organization like church. If I'm not wrong, Drucker's background is from church. I am sorry if this is not right. Give me a explanation. And I realize non profit needs management too to make grow well."
└► Editor (Netherlands)	Why You Want to Use MBO?	"Just be careful to ask if a tool can also be used for another situation or application than what is was designed for. Management methods are only valid within their assumptions. If you go outside of that you entering the quicksand."
└► Nicholas Kiruma (Kenya)	Does MBO Work in Church	"I think it is high time MBO principles were applied to non profits like in church for optimal functioning by developing strategic plans and objectives. Or else they risk doing things the same old way and getting the same results."
└► Ahmed Mahmoud Ahmed Abdo (Egypt)	MBO in Social Institutions	"Yes, M.B O. can be applied in church and all other social institutions because in brief it is centered around specifying goals entrusted to individuals to carry out regardless whether for profit or not."

└► Stefan Knauer (Germany)	From Objective to Actions	"In my opinion this is exaclty the strong point for MBO, that you do not plan activities, but define responsabilities by defining objectives for your employees (and the management objectives in which those need to be embedded). This means a cultural challenge - not to define the actions but the outcome of them!"
└► John Troughton (Australia)	Drucker concepts	"Business has the social responsibility to 1 define the action 2 define the performance 3 allocate the responsibility 4 review performance Individuals have a wish to succeed, imagination and initiative and have "freedom to act, but with responsibility" so 1 are free to carry out the action in any way they like 2 are responsibly for their actions 3 co-operatively review their actions. So yes the management culture has changed for both the manager and the individual."
└► Ahmed Mahmoud Ahmed Abdo (Egypt)	MBO is a Very Wide Concept	"Although I taught & trained junior managers and students on MBO, still I find it a very wide scope to the extent that it can't be limited unless temporally, since it involves a lot of depth because it is made up of multiple thoughts, ideas, actions, evaluation, review, correction etc. In brief, MBO embraces too much elements which make it rather everlasting."
└► Hubbard (UK)	Management By Objectives	"By not defining specifics has Drucker not given his a view a multicultural perspective?"

	└► Ken (England)	SMART	"I think the SMART acronym is often misrepresented as Specific Measurable Achievable Realistice and Timebound. I think people have difficulty with the Achievable and Realistic elements. Try Specifc Measurable Alligned Relevant and Timebound. I think it is much better and I actually think this is the correct acronym. Why? Would a Vinci have designed a Helicopter with the usual acronym. Think Realistic!!!"
	└► Markus (Germany)	Who invented SMART	"I really would like to know when the acronym smart was firstly used and who used it."

                       
                        └► Martin (USA)
                        
                      MBO Disadvantages
                      "Here's a couple of weaknesses in the MBO assumption base that I use:

1. It emphasizes the setting of goals over the working of a plan.
 
2. It underemphasizes the importance of the environment or context in which the goals were set. That context includes everything from the availability and quality of resources, to relative buy-in by leadership and stakeholders.

3. It doesn't address the importance of successfully responding to obstacles and constraints as essential to reaching a goal. The model didn’t adequately cope with the obstacles of:

· Defects in resources, planning and methodology,

· The increasing burden of managing the information organization challenge,

· The impact of a rapidly changing environment, which could alter the landscape enough to make yesterday’s goals and action plans irrelevant to the present."

                       
                        └► Kingsley (Nigeria)
                        
                      Human Resources
                      "What exactly are the steps and relevance of Management By Objective?"

	└► Shahadat (Bangladesh)	Is MBO operational?	"Is Management By Objectives an operational everyday job? If yes, how?"
	└► LINGARAJU.N (INDIA)	SMART Mgt.	"Hi.. Actualy i realized that in my own organization."

                       
                        └► farrokh mehta (india)
                        
                      SMART Goals
                      "Make it SMARTER. Goals must be Energising and Reviewed"

                       
                        └► Leon Booysen (South Africa)
                        
                      Objectives in Economic Crisis
                      "What is very important in these times is customer retention - business must look after their customers in hard times and do what they do well. Customers are spending less, but let that at least be with you."

	└► Gemma (UK)	MBO - SMART	"Achievable v realistic... Is achievable more relevant to the individual completing the tasks? Whilst realistic may tak into account external factors out of the control of the individual?"
	└► Pam (USA)	SMART: Achievable vs Realistic	"An easy way to see the difference between achievable and realistic is with weight loss. Is having a goal of losing twenty pounds in two weeks SMART? It is specific, measurable, achievable, but losing twenty pounds in two weeks is not realistic. Changing the time frame can make this achievable and realistic."

                       
                        └► India (Jabeen)
                        
                      SMART and MBO
                      "The SMART method of checking MBO validity is impressive."

                       
                        └► Prakash Sewsagur (Mauritius)
                        
                      Agreed, but Possible!
                      "I totally agree with you, however I have now people applying this method to the perfection...."

                       
                        └► Ballachanda B subramani (India)
                        
                      smart
                      "Smart is the guide line to achieve the desire goals"

Management by Objectives. SMART (Drucker)