Management by objective (MBO) is a strategic management model that strives to improve an organization’s performance by clearly defining its objectives, for which the management and employees agree. The theory encourages the employee’s participation in setting goals, planning out actions, and aligning the objectives across the organization.
An example for better understanding:
The steps in the process of MBO are:
First and foremost, the organization must set long-term objectives and goals to be achieved.
As per the goals set, managers need to delegate the work and set objectives for individual employees to work on.
Monitoring the performance is necessary as it will give a clear picture of whether the work is going on as per the set objective.
Each activity performed should be evaluated. Management needs to take steps against inaccurate actions.
Feedback should be given to employees on their performance so they can work on its betterment if required.
Appraisals are given to employees performing well and achieving the organization's goals.
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The management by objective is crucial for the organization as it brings different benefits; they are:
The types of MBO can be categorized into three:
The objectives set are for the overall development of the teams and departments.
The objectives are set individually for employees' development.
The objectives are generic for the organization's overall development.
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