What is Management By Objectives When it Comes To Businesses?

Management by objectives, also known as management by results, is a popular management strategy that has been around for decades. The basic premise of Management by objectives is that businesses should set clear goals and then manage their resources and activities to achieve them.

Peter Drucker popularized this concept when he wrote The Practice of Management in 1954. Since then, many businesses and organizations have adopted the concept.

The MBO Process Cycle

The MBO process cycle is a key tool for managers in any organization. It provides a framework for setting objectives, measuring progress, and making decisions. The cycle can be divided into several distinct phases:

Goal setting: The first step is to set clear and specific goals. These goals should align with the company’s overall strategy. The process follows the mnemonic “SMART” to ensure that goals are Specific, Measurable, Achievable, Relevant, and Time-bound.

Defining employee objectives: Once the company’s goals have been set, it is time to define objectives for each employee. These objectives should be directly linked to the company’s goals. Moreover, they should be specific and measurable.

Monitoring progress and performance: The third step is to monitor progress and performance constantly. This is possible through regular reports and reviews. The aim here is to identify gaps between actual and desired performance.

Providing feedback: The fourth step in Management by objectives is to provide feedback. This feedback should be timely, accurate, and constructive. 

Adjusting objectives: The fifth and final step involves adjusting objectives. This may be necessary if objectives are not being met or if the company’s goals have changed. Adjusting objectives ensures that the process remains relevant and effective.

The Benefits of Management By Objectives for Businesses

There are many benefits of MBO for businesses. Let’s look at some of them below.

1. Effective Planning

It provides a framework for effective planning. It forces managers to think carefully about their objectives and how they’ll achieve them. It helps ensure resources are effectively used. Furthermore, it helps to avoid duplication of effort and waste.

2. Improved Communication

This management style improves communication between managers and employees. Objectives are clear from the outset. Furthermore, progress is regularly monitored, and feedback is provided. It helps ensure that everyone is aware of what needs doing and how they can help achieve the company’s goals.

3. Enhanced Motivation

The process can enhance motivation levels within an organization. This is because employees get a sense of ownership over their objectives. They know that their efforts are being monitored and that they’ll get a reward for meeting their objectives.

4. Greater Accountability

It increases accountability within an organization. It is because objectives are specific and measurable. Furthermore, progress is regularly monitored. It means that employees and managers alike can be accountable for their performance.

5. Increased Flexibility

The process is flexible enough to accommodate changes in the business environment. This is because objectives are adjustable if or when necessary. The process thus remains relevant and effective.

An In-depth Guide to Management By Objectives

Management by objectives is a valuable tool for any organization. It can help improve planning, communication, and motivation. Moreover, it can increase accountability and flexibility. If you’re looking to improve the efficiency of your business, then this management style could be the answer.