What is Management By Objectives ?
483 reads · Last updated: December 5, 2024
Management by objectives (MBO) is a strategic management model that aims to improve the performance of an organization by clearly defining objectives that are agreed to by both management and employees. According to the theory, having a say in goal setting and action plans encourages participation and commitment among employees, as well as aligning objectives across the organization.
Definition
Management by Objectives (MBO) is a strategic management model aimed at improving organizational performance by clearly defining objectives that are agreed upon by both management and employees. This approach emphasizes participation in goal setting and action planning to encourage employee involvement and commitment, aligning goals throughout the organization.
Origin
The concept of Management by Objectives was first introduced by Peter Drucker in 1954, detailed in his book 'The Practice of Management'. Drucker believed that through clear goal setting and employee involvement, organizations could more effectively achieve their strategic objectives.
Categories and Features
MBO typically involves several key steps: setting objectives, developing action plans, monitoring progress, and evaluating performance. Its features include an emphasis on clarity, measurability, and achievability of goals. The advantages of MBO include increased employee engagement and accountability, while its disadvantages may include an overemphasis on short-term goals at the expense of long-term strategy.
Case Studies
A classic example is Hewlett-Packard's adoption of MBO in the 1960s to drive innovation and market expansion. Through clear goal setting and employee involvement, HP successfully maintained a leading position in the competitive tech market. Another example is General Electric under Jack Welch, where MBO led to significant performance improvements, particularly in enhancing productivity and market share.
Common Issues
Investors applying MBO might encounter issues such as unclear goal setting, lack of genuine employee involvement, and an overfocus on short-term objectives. The key to resolving these issues lies in ensuring the clarity and measurability of goals and encouraging active employee participation in the goal-setting process.
