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
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Cascading of organizational goals and objectives,
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Specific objectives for each member,
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Participative decision making,
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Explicit time period, and
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Performance evaluation and provide feedback.
Management by Objectives also introduced the SMART method for checking
the validity of the objectives, which should be 'SMART':
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Specific
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Measurable
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Achievable
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Realistic, and
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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."
Management by Objectives, SMART Special Interest Group

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Recent User Comments
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Garvita - India
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MBO - Significance for Employees? |
"How is Management By Objectives important for an employee?" |
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Amey - India
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How to Implement Management By Objectives? |
"How should one implement management by objectives?" |
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- UAE
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Management By Objectives Examples |
"Can anyone give some examples of organizations using MBO Successfuly today?" |
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Prakash Sewsagur - Mauritius
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SMARTER than SMART |
"From my experience, I would write smarter now instead of only smart as Endurane & Responsiveness are both of great importance." |
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- India
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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???" |
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Best User Comments
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Robert - Ireland
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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." |
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Ana - UK
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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," |
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Heylen - Belgium
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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." |
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Amit Srivastava - India
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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." |
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Frank - Netherlands
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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...." |
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- Russia
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Achievable vs. Realistic |
"I don`t see much difference between the terms "Achievable" and "Realistic", I`d rather say "Results-oriented" or "Results-directed"." |
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Helen - Ireland
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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" |
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Gabriel - Nigeria
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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." |
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Nirbhay Singh - India
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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..." |
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- India
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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." |
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Raphael - Cameroon
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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." |
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Chipo - Zimbabwe
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Circumstances for MBO |
"Does MBO work in times of uncertainity and change?" |
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