Management by Objectives (MBO) was first popularized by Peter Drucker in 1954 book ‘The Practice of Management’. Drucker drafted MBOs as an approach to get the management and employees to jointly set goals to achieve known as objectives. The main purpose for setting objectives was to give both the managers and employees a clear understanding of what they were expected to do in the organization in order to achieve the objectives set. The objectives were set during certain time periods which at the end of the period to evaluative performances are carried out to determine the extent to which the set objectives had been achieved. An example of an objective includes attaining a sales or profit target by the end of a financial year.
In the modern world of business where gaining competitive over competitors has became one of the main goals by organization, Management by Objective has become one of the most widely accepted philosophy of management. One of the factors that has made MBO the most acceptable management approach is its demanding and rewarding styles of management. MBO further received recognition when it becomes an integral part of “The HP way”. Hewlett-Packard incorporated this management technique at every level within the company; managers had to develop objectives and integrate them with those of other mangers and of the company as a whole. This approach focuses attention on the achievement of objectives through involvement of the concerned parties. For example trough building strong team spirit as MBO is mainly based on the assumption that people achieve more when they know what is expected of them and can relate their personal goals to organizational objectives. Other features of MBO include good subordinate participation, joint goal setting, support and encouragement from top level manager to subordinates.
MBO is a democratic style of management approach where every subordinate is involved and encouraged to participate towards achieving organizational objectives. MBO is an approach to planning that aims to overcome barriers that might stop an organization from achieving its objectives. It involves the setting up of goals by managers and their subordinate working together by specifying responsibilities and assigning authority for achieving the goals. The final step involves constant monitoring of performance so as to initiate continuous improvement.
Main Features of MBO
The following are the prominent features of MBO;
- All activities are goal oriented: The first important feature of the MBO is that under it all the activities happen to be goal-oriented. This means that MBO concentrates on the determination of unit and individual goals in with organizational goals. These goals set state responsibilities of different parts of the organization and help to coordinate the organization with its parts and its environment.
- MBO views organization as Dynamic Entity: this feature considers the organization as a dynamic entity. This means that every organization is affected by various external and internal factors therefore the organization is considered to be a dynamic unit. The dynamic nature affects the objectives which as a result make it possible that the objectives set today may not be realized. In such an event the organization might be forced act swiftly to change its objectives
- MBO is a Participative Attempt: The MBO process is characterized by high level of participation of the concerned people in goal setting and performance appraisal. Increased participation provides the opportunity to influence decisions and make clear job relationship with managers and their subordinates.
- MBO Matches the Objectives and Resources: The objectives set when the MBO approach is adopted by organization are based on the resources available so as to avoid having incomplete tasks or activities because of the lack of resources.
- MBO is a Philosophy and not a Technique: MBO is not a technique of management but it’s a philosophy, because a technique can only be applied or used in a one department and its effects will only be felt on the particular department. For example an inventory technique can only be used in relation to stock control and it cannot be used in another department like HRM.
- MBO gives more emphasis to Review and Performance Appraisal: regular appraisal of the work performance of employees form one the important characteristics of MBO. This Philosophy helps observe whether all the employees are performing at the expected level and also identify if there is any impediments in their work performance.
- MBO provides more freedom to Subordinates: With MBO Philosophy the subordinates are not only associated with the task of coming up with the objectives but they also get complete freedom in the performance of their work. This philosophy gives them the right to make decisions related to their designation and as a result this increases their importance which improves their interest and job satisfaction.
- MBO gives more emphasis to results and not to work: With the MBO philosophy more focus is given to results. The subordinates have the freedom to choose which technique to adopt to achieve the final result. This means that the subordinates are expected to give the best possible results regardless of the technique used.