The Difference that Management by Objectives (MBO) Can Make for Your Business
Management by Objectives is a form of goal definition within a business that allows the management and the rest of the employees to understand and agree on the same outcomes that need to be achieved by that business.
The term was coined in 1954 by Peter Drucker in his book called “The Practice of Management”.
The foundation behind applying management by objectives is to set goals, select the action must be taken in order to achieve those results, and make the appropriate decisions along the way.
An essential part of this process is to be able to measure and compare the expected markers that have been set with the actual performance of the employee. When everything is working at its best, the employees will have participated in the actual goal setting development and will have helped to decide upon the path that they will follow in order to achieve it.
When this is the case, employees have a greater likelihood of completing their responsibilities.
The late George S. Odiorne, known for his highly popular management concept that is used worldwide, and who had two consulting organizations that specialized in management by objectives, said that management by objectives can be explained by calling it a process where a company’s superior and subordinate managers work together to recognize the desired outcomes, define the areas of responsibility for each individual in the achievement of those goals, and establishing the measures that will be utilized as a guide to understand the performance of the team and to be able to comprehend each employee’s contribution.
The Benefits of Management by Objectives
The nature of management by objectives allows it to bring a number of important benefits to an organization. Its very essence ensures that every team member knows precisely what his or her role will be in the achievement of a goal, and fully understands the desired outcomes.
This allows every employee to build a fuller comprehension of how his or her contributions relate to the achievement of the goals of the business as a whole. Furthermore, management by objectives places emphasis on the fulfillment of an individual employee’s personal goals.
Among the benefits that can be experienced by a business using management by objectives are:
· Motivation – employee empowerment rises through the involvement of team members in the goal setting and planning process. This will in turn boost the job commitment and satisfaction experienced by each employee.
· Goal Clarity – team members will all understand what the desired outcomes are, and how their activities contribute to those results. This helps to create a common purpose and minimizes deviation from the main path.
· Common Goals – using management by objectives, managers are able to make certain that the performance of their subordinates are connected to the goals of the business.
· Better Commitment – when team members are allowed to take part in goal setting and establishing their activities to achieve those goals, they are much more committed to those goals than they are to objectives created by someone else.
· Improved Communication and Direction – through regular measurements and reviews, and with steady interactions among superiors and subordinates, an improved communication is established throughout the business, naturally solving many issues as they arise.
Limitations to Management by Objectives
While there are several important advantages to management by objectives, there remain a number of limitations to the technique, as well.
These include the following:
- It runs the risk of placing too great a priority on goal setting as opposed to the development of a plan that will bring about the desired outcomes.
- It may place too little emphasis on a goal’s context within the actual environment in which it is being set.
- Businesses using management by objectives evaluate the team members solely by performing a comparison with an “ideal” employee. It utilizes a form of trait appraisal which examines only what the team member should be and not what he or she should be doing.
Management by objectives must be carefully practiced in order to ensure that it maintains a realistic and practical alignment with the culture of the business.
There are many outside factors that can distort the results of measures which must always be kept in consideration, such as the actual proper use of the technique, its practice throughout the organization, and the less-than-ideal or self-centered team member.
In order to truly benefit from management by objectives, both the superiors and subordinates must all be genuine participants.
