What is Management by Objectives?

Management by objectives is a strategic management technique that helps an organization manage its employees by setting clearly-defined goals for each employee. Management by objectives allows employees to see their contributions that help achieve the company's goals.

Benefits of Management By Objectives

Improves performance of the employees and the organization

Management by Objectives segregates tasks and objectives of individuals. This makes each employee aware of his/her set of objectives for the company. This greatly improves the performance of employees.

Further, employees set their objectives along with the employers. Having a say in the tasks they perform also helps in increasing the overall productivity of the employees and in turn, of the company.

Career growth of the employees

The employees focus on their individual goals when the tasks of the employees are specified. Further, they try to grow in their specific field and lead to the company's growth in that direction.

Set clear boundaries regarding roles and responsibilities

The employees function better and focus on achieving their targets when roles and responsibilities are clearly defined within the organization.

The five steps of MBO

The whole MBO process involves 5 steps:

Define the Objectives of the organization

The first step in the MBO process is clearly defining the organization's goals. The employees work towards achieving the set goals of the organization.

Also, ideally, you should set 3 goals for the organization and try to achieve them over time. Then, the organization's various managers define their particular departments' goals. Further, these goals align with the goals of the organization.

Thus, this helps set up a target for the company’s growth. Set all the tasks and targets according to the goals of the organization.

Define the Objectives of the employees.

Then, set the employees' objectives according to the organization's goals. The employees are given a list of objectives. The employees set their targets and fulfill their objectives.

This is a one-on-one meeting where the managers and employees talk about the employees’ goals and set targets accordingly. The employees and managers set these objectives.

This helps make the goals more achievable and does not put more pressure on individuals than they can handle. As the employees have a say in the set goals, they also work harder towards achieving them.

Examine the Performance of the organization.

Examine the growth of the organization after setting the goals weekly. Then, monitor the statistics. Then, review the goals weekly.

Set further targets if the statistics show growth according to the goals. Review and change the goals if the growth could be more active.

This helps in checking the organization's growth and making changes when necessary.

Review the Progress of each Employee

The progress of each employee is reviewed weekly. The manager and employee discuss how the employee tries to achieve his/her targets. The tasks performed and goals achieved are reviewed.

New goals are set. The growth and efforts of the employees are examined. This helps keep them on track and redefine the employees' goals and objectives when necessary.

This is essential for the overall growth of the employees and the organization.

Provide employees with Timely Rewards and Appreciation or Feedback

Employees are then provided with rewards and appreciation when they fulfill their targets.

Review the goals in case of setbacks in fulfilling targets. The managers set new targets. They give them proper feedback.

This process helps keep the employees moving forward and identifies stagnant performance.

Pros and Cons of MBO

The MBO process has many benefits:

1. Setting clear targets and boundaries for employees

This helps in ensuring that every individual works towards certain goals targeted toward the greater goal of the organization.

1. Promoting the role of each individual in the organization

Each individual feels a sense of identity and individuality in the organization. Thus, this helps him perform better in a team.

1. Reviewing the growth and progress of the employees and organization

The place where there is no growth can be identified easily through MBO in management. Thus, review and change the goals accordingly.

1. Promoting better teamwork and communication

This helps the employees achieve the organization's greater goal and promotes teamwork. The team members work together to achieve the goals. Further, there is proper communication among the members.

The MBO process has some disadvantages as well. The MBO process can stress employees as there is constant pressure to achieve goals. It can make the office life hectic at times, as well. Sometimes, when the whole management process is in terms of the MBO process, it can lead to hectic schedules. This can hamper the work-life balance of individuals.

FAQs

1. What are the 5 steps of management by objectives?

The 5 steps in management by objectives are defining the objectives of the organization, defining the objectives of the employees, examining the organization's performance, reviewing the employees' progress, and providing employees with rewards and appreciation where needed.

1. Why is MBO important in management?

MBO is important in management as it improves the performance of the employees by defining objectives and improving communication between managers and employees.

1. What is the difference between MBE and MBO?

In MBO, Management is done by defining objectives. Whereas in MBE, management is done by pointing out exceptions.

1. What are the disadvantages of MBO?

The disadvantages of MBO are that MBO can create a high-pressure work environment for employees and lead to competitiveness among the employees.

1. Who invented management by objectives?

Peter Drucker invented MBO in his The Practice of Management in 1954.

When the question comes, ‘What is management by objectives?’, we can say that the MBO process is a 5 step process that helps organizations manage their employees and goals. MBO in management means defining the organization's objectives, defining the employees' objectives, examining the organization's performance, reviewing the employees' progress, and providing employees with rewards and appreciation where needed.

Thus, the MBO process should be used but not overused. This helps in managing and setting goals. But also, it is manageable for the employees.