Management by objectives (MBO) is a process through which specific goals are set collaboratively for the organization as a whole and all units and individuals within it. The goals are then used as a basis for planning, managing organization activities, evaluation of performance and reward. MBO methods of performance appraisal are results-oriented. That is, they seek to measure employee performance by examining the extent to which predetermined work objectives have been met. Usually the objectives are established jointly by the supervisor and subordinate. Once an objective is agreed, the employee is usually expected to self-audit; that is, to identify the skills needed to achieve the objective. Typically they do not rely on others to locate and specify their strengths and weaknesses. They are expected to monitor their own development and progress. The use of management objectives was first widely advocated in the 1950s by the noted management theorist Peter Drucker.
To be successful, an MBO program should be part of a small business's overall system of planning and goal setting. The first step in implementing MBO is to establish long-range company goals in such areas as sales, competitive positioning, human resource development, etc. A small business owner may find it helpful to begin by defining the company's current business and looking for emerging customer needs or market trends that may require adaptation. Such long-range planning provides a framework for charting the company's future staffing levels, marketing approaches, financing needs, product development focus, and facility and equipment usage.
The principle behind MBO is to create empowered employees who have clarity of the roles and responsibilities expected from them, understand their objectives to be achieved and thus help in the achievement of organizational as well as personal goals. One of the important features and advantages/strengths of MBO is, motivation - Involving employees in the...
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