History of MBO
Peter Drucker first describes this approach in 1954 in his book ‘The Practice of
Becomes prominent in 1960
it spread in the 1970s and 80s to midsized organizations, commercial and other.
In the mid-2000s it is viewed in many circles as a somewhat dated technique not well
adapted to the rapid changes and uncertainties of a dynamic Information Age.
The Two Eras
– 60’s 70’s 80’s – MBO comes in vogue
• Idea: improve management & productivity by being more defined. Having a
goal in mind makes it easier to achieve it.
– Top level strategic goals & objectives (g-o)
– Supportive objectives and action plans for lower level
– Organizational role and mission statement. Specific action plan for
each member through participative decision making
– Establish standards
– Periodic assessment
– The idea had Assumption that more defined about traditionally broad state of g-o
would lead to performance improvement. Which was acted as a weakness.
History of MBO
– 80’s and 90’s – SMART Goal era
• SMART: Specific Measurable Actionable Reasonable Time-Bound.
• Idea: A goal that doesn’t shape behaviour is ineffective
• Theory suggested that SMART parameters were good predictors of
influential or effective goal.
• They gave an impression that they are pointed, have an edge, have
a sense of energy created by the specify, time limit and
– Didn’t address ‘the human nature’ issue.
– didn’t address the importance of successfully responding to
obstacles and issues as essential to reaching a goal.
– Underemphasize the importance of environment/context.
– Emphasize the setting of goals over the working of a plan.
The MBO Concept
Process of defining objectives within an organisation
Key features are : Goal setting, Choosing course of action and decision
Employees more likely to fulfill their responsibilities when they are actively
involved in defining objectives
Used in various domains of activities
Collective and individual objectives
Necessary quantifying and monitoring
MIS helpful in setting relevant objectives and monitoring their ‘Reach Ratio’
Incentives linked with results
SMART Goal Setting
• Described by Paul J. Meyer
• Guides people and organisations to set objectives
• Helps in setting Key Performance Indicators like performance management
and personal development
• Clear and Unambiguous
• Concrete criteria for measuring
• Realistic and within reach
• Aligned with other goals
• With a time frame
Advantages of MBO
• 1) Means of planning and control
• 2) Superior and subordinate both set the goals together
• 3) The means to achieve the goal is discussed
• 4) MBO aids in structural changes wherever it seems
necessary and transforms the structure for good
Disadvantages of MBO
• 1) Subordinate feels uncomfortable
• 2) Lacks Objective clarity (quantity enhancement or
quality enhancement? If for organisation or for individual
• 3) Too much multi-tasking !!!
• 4) Low initial goal set by subordinates
MBO in a practical context: Case of
• Linked to the Accenture
core values and the
three key leadership
operator and value