Management by Objectives (MBO) is a tool that allows managers to improve performance by setting objectives at different levels of the organization. MBO was originally coined by Peter Drucker as both a management approach and philosophy. It involves managers jointly setting common goals and individual responsibilities. Specialized workers can lose sight of overall goals, but MBO helps align functions to achieve corporate objectives through participation, evaluation, and fair rewards.

1. Dr. Rajeev Babel, FCS

2.  A manager’s concern should always be to
increase his own effectiveness and that of the
total organization. An organization which
concentrates on doing the right tasks i.e. its
focus is on effectiveness, will surely survive and
grow even it it performs the tasks in a somewhat
less efficient manner. But a firm whose choice of
task is totally wrong, no matter how high its
efficiency, will certainly fail.
 Management by objectives (MBO) is a tool by
which managers can improve their performance
and increase their effectiveness.

3.  The term MBO was coined by Peter Drucker
more than 25 years ago. Drucker used the
term in a very broad sense to connote not
just a specific tool, but rather an approach
or philosophy of management.
 Later contributors to the subject have
focused o MBO in terms of improving
performance of either an individual in the
context of a superior-subordinate
relationship or the entire organization.

4.  Today’s technological sophistication requires
specialized knowledge, specialized skills and
specialized workers. The danger is that these
specialized workers, in their quest for perfection
within the narrow confines of their specialized
function, often tend to lose sight of the
organizational goals.
 They forget they are working for an
organization, and that their specialized function
has to operate within specified parameters.
 MBO helps to mesh together the various
functions specialists for the achievement of the
firm’s overall objectives.

5.  Peter Drucker: Management by objective is
regarded as a system for improving
performance, both the individual managers
and the enterprise as a whole by the setting
of objectives at the corporate, departmental
and individual manager’s level.

6.  George R. Odiorne: MBO is a process
whereby the superior and subordinate
managers of an organization jointly identify
its common goals, define each individual’s
major areas of responsibility in terms of
results expected of his …. and us these
measures as guides for operating the unit
and assessing the contribution of each of its
member.

7.  MBO is a process whereby both superior and
subordinate managers jointly identify their
common goals of their work unit and define
each employee’s major areas of
responsibility and goals with his active
participation.

8.  A philosophy of management
 Goal oriented approach
 Common objectives and individual goals
 Participation and involvement
 An interactive approach
 A comprehensive approach
 A systems approach
 Applies to total management system

9.  Mutual understanding
 Expected efforts and their contribution
 Participation
 Evaluation
 Fair reward

10.  Setting corporate or overall objectives
 Setting objectives of each department or
unit
 Setting individual’s goals or targets
 Matching objectives and resources
 Recycling the objectives
 Developing action plans
 Implementation of action plans
 Periodic reviews

11.  Evaluation
 Preparation
 Top management support
 Time horizon
 Entry point

12.  Benefits to subordinates
 Benefits to superiors
 Benefits to the organizations