Management by Objectives (MBO) definition, limits and benefits

MBO is a business management method based on the clear and precise definition of individual and collective objectives. Its meaning is Management by Objective. This approach seeks to align employee activities with overall business goals for better performance.


Origin - Who invented it

Management by Objectives (MBO) is an approach that was primarily formulated and popularized by Peter Drucker, a management consultant, in his book "The Practice of Management" published in 1954. Drucker defined MBO as a management philosophy , rather than a specific technique, recognizing that goals are determined by the situation and not by a formula.


Innovation of Management by Objective - Key principles

Management by Objectives (MBO) was particularly innovative when introduced by Peter Drucker in the 1950s. It marked a significant departure from the traditional approaches to management that were widely used at the time.

Until the advent of MBO, management was primarily task and activity oriented. Managers focused on direct work supervision, process control, and accomplishment of specific tasks. Employees were often seen as passive executors, who had to follow the instructions and procedures established by management. This management approach was often rigid and limited employee initiative and creativity.

Management by Objectives introduced a number of changes and innovations that marked a turning point in management methods:
  1. Results Orientation: With MBO, the focus has shifted from accomplishing specific tasks to achieving defined results. This has helped focus efforts on what matters most to the success of the organization.
  2. Employee Involvement: MBO encouraged the active involvement of employees in setting their own goals. This marked a departure from the traditional top-down approach and fostered greater employee engagement and motivation.
  3. Employee autonomy: MBO has given employees greater autonomy to determine how best to achieve their goals. This helped drive innovation and creativity, and held employees accountable for their results.
  4. Outcome-based evaluation: MBO has introduced performance evaluation based on the achievement of objectives, rather than following procedures or accomplishing specific tasks.
  5. Organizational alignment: MBO helped align individual and team goals with the organization's strategic goals. This has fostered greater consistency and efficiency in pursuing corporate goals.

Thus, the MBO was a key element in the transition from management by activity to management by objective. It was part of a broader context of change and evolution in management practices, marked by increased attention to organizational effectiveness, employee motivation and strategic management.



Implementation of Management by Objective

Implementing Management by Objectives requires careful thought and planning. Here are the steps generally followed to deploy the Management by Objective process:

  1. Goal Setting: This is MBO's first step. It consists of defining clear and specific objectives that are aligned with the strategic goals of the company. For example, a goal could be to increase turnover by 10% over the next year, or to reduce delivery times by 15% within six months. These objectives are usually discussed and agreed upon between the manager and the employee to ensure their buy-in and commitment.
  2. Action planning: Once the goals have been set, the next step is to develop a detailed action plan that describes how each goal will be achieved. This plan could include specific actions, resources needed, timelines and responsibilities. For example, to achieve the goal of increasing revenue, the action plan might include activities such as expanding the product line, improving customer service, or increasing marketing efforts. marketing.
  3. Periodic review: MBO requires regular evaluation of performance against objectives. This could be done through regular review meetings where the manager and employee discuss progress towards achieving goals. If performance falls short of expectations, the reasons for this underperformance are explored and corrective plans are developed.
  4. Feedback and Learning: Feedback is an essential component of MBO. Elallows the employee to understand what is working well and what needs improvement. Feedback should be constructive, behavioral and future-oriented. Additionally, lessons learned from successes and failures are used to continually improve processes and performance.

Each of these steps requires open communication, mutual trust and a commitment to joint success for MBO to be fully effective.


Benefits of Management By Objectives

Management by Objectives has several benefits:
  1. Alignment: It ensures a clear alignment between the objectives of the company and those of individuals and teams.
  2. Empowerment: By setting specific goals, employees are empowered and can focus on what's most important.
  3. Motivation: Clarity of goals and regular feedback can increase employee motivation and engagement.




Limits and criticism of Management By Objectives

Like any method, Management by Objectives also has its limitations and criticisms. Among them :
  • Goal overload: There can be a tendency to set too many goals, which can lead to dilution of effort and loss of focus.
  • Neglect of qualitative aspects: MBO may encourage an excessive focus on quantitative measures at the expense of the qualitative aspects of the work.
  • Lack of flexibility: MBO can create rigidity if objectives are not adjusted to changing circumstances.


These criticisms can be overcome by setting a limited number of goals, balancing quantitative and qualitative measures, and regularly revising goals to reflect changes in the environment.



Further developments of MBO

The Management by Objectives method has evolved and been complemented by other methods, such as the Key Objectives and Results (OKR) method. Inspired by Management by Objective, OKR has been popularized by companies like Google and Intel. It focuses on setting ambitious and measurable objectives, complemented by specific "key results" that indicate how the objective will be achieved.


Conclusion

In conclusion, Management by Objective is a powerful method to aligning organizational efforts, eMBOwering employees and improving performance. Although it comes with challenges, careful implementation and adaptation to the specifics of the organization can help overcome these obstacles and unlock MBO's full potential.
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Thursday, 25 April 2024