Management by objectives (MBO) refers to a strategic approach that relies on clearly defining objectives that both employees and management agree upon in order to reach the goals of an organization.
What Is the Goal of Management by Objectives?
The goal of management by objectives is to improve an organization’s performance. To better monitor performance and identify problems areas faster, the organization sets clear goals. The process reinforces the alignment between outcomes and activities.
Getting employees involved in the process of choosing the right objectives helps them better understand how their work contributes directly to the success of the company.
Why Is MBO Important?
MBO is important to enhance employee engagement and to help nurture a more collaborative workplace.
What Are the Three Types of Management by Objectives?
The three types of management by objectives include:
- Strategic objectives: more generic objectives that focus on higher levels of the company.
- Tactical objectives: objectives aim at specific departments or teams.
- Individual objectives: specific objectives that are different for each employee.
What Are the Stages of the MBO Process?
The stages of implementing the MBO process in a company include:
- Defining new objectives for the company based on its mission and values
- Sharing the objectives with the workforce
- Encouraging employees to actively contribute to those objectives by setting individual goals
- Monitoring the progress of the objectives
- Evaluating the achievement of the objectives by giving feedback
- Rewarding employees for their contribution
What Are the Benefits of Management by Objectives?
The benefits of management by objectives include:
- Increasing employee motivation and engagement
- Improving communication between the management team and the employees
- Building a stronger company culture
- Reducing employee turnover
- Achieving positive results faster
- Improving teamwork
What Are the Drawbacks of MBO?
Drawbacks of MBO include:
- Lack of strategic vision
- Lack of long-term planning
- Too much focus on the achievement of the objectives and not enough on the work environment
- Higher stress levels amongst employees
What Are Examples of Management by Objectives?
Examples of management by objectives include:
- Increasing the average spent by customers by 10%
- Reducing customer complaints by 20%
- Increasing the number of leads by 15%
- Reducing the waiting time for customers by 1 minute