What is Management by Objectives (MBO)? What are its advantages and disadvantages?

Essay by Vandana1University, Master'sF, March 2006

download word file, 4 pages 4.0


The use of management objectives was first widely advocated in the 1950s by the noted management theorist Peter Drucker. MBO (management by objectives) methods of performance appraisal are results-oriented seeks to measure employee performance be examining the extent to which predetermined work objectives have been met.

Usually the objectives are established jointly by the supervisor and subordinate. An example of an objective for a sales manager might be: Increase the gross monthly sales volume to $250,000 by 30 June. Once an objective is agreed, the employee is usually expected to self-audit; that is, to identify the skills needed to achieve the objective. Typically they do not rely on others to locate and specify their strengths and weaknesses. They are expected to monitor their own development and progress.


What is MBO?

Management by objectives (MBO) is a systematic and organized approach that allows management to focus on achievable goals and to attain the best possible results from available resources.

It aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization. Ideally, employees get strong input to identify their objectives, time lines for completion, etc. MBO includes ongoing tracking and feedback in the process to reach objectives.

MBO Principles

- Cascading of organizational goals and objectives

- Specific objectives for each member

- Participative decision making

- Explicit time period

- Performance evaluation and feedback

The objectives must be:

- Focused on a result, not an activity

- Consistent

- Specific

- Measurable

- Related to time

- Attainable

MBO Strategy: Three Basics

- All individuals within an organization are assigned a special set of objectives that they try to reach during a normal operating period. These objectives are mutually set and agreed upon by individuals and their managers.

- Performance reviews are...