Management by Objectives (MBO) is a process of defining objectives within an organization so that management and employees agree to the objectives and understand what they need to do in the organization. The term "management by objectives" was first popularized by Peter Drucker in his 1954 book 'The Practice of Management'. The essence of MBO is participative goal setting, choosing course of actions and decision making. An important part of the MBO is the measurement and the comparison of the employee’s actual performance with the standards set. Ideally, when employees themselves have been involved with the goal setting and choosing the course of action to be followed by them, they are more likely to fulfill their responsibilities. According to George S. Odiorne, the system of management by objectives can be described as a process whereby the superior and subordinate managers of an organization jointly identify its common goals, define each individual's major areas of responsibility in terms of the results expected of him, and use these measures as guides for operating the unit and assessing the contribution of each of its members. Here is a quick 5 step process outline that most companies use to manage MBOs (Management by Objectives), recapping some of the things I talked about in my last post. As you will see, this is just common sense. First, companies need to set corporate objectives. Some goals are then set for the employees to meet those objectives. The employee performance is then measured through the performance cycle, and evaluated at the end. Finally, the employee is rewarded for his or her performance, and we repeat the cycle.
To elaborate on the
comments I received in the last post, setting good objectives is very
important; that’s at the core of MBOs. Depending on the level of
sophistication of the MBO solution, some help with objective setting, but
most solutions simply help out to manage them. A big aspect of MBO solutions is
the performance
monitoring. Traditionally, that’s an activity performed
at the end of a performance cycle. With an MBO solution, managers can
usually record some feedback about how employees performed on a certain
milestone at anytime. This way, the employee’s contribution is not
forgotten when it’s time to evaluate them. The performance evaluation is another big
piece of MBO management. It is related to performance monitoring but records
final observations