MBO is a goal setting approach where managers and subordinates jointly determine specific and measurable objectives together that are aligned with the organization's policies. Objectives are periodically reviewed and evaluated to determine progress, with rewards allocated based on results. While MBO fell out of favor due to rigidity, its emphasis on setting clear and agreed upon goals remains an effective management strategy.

1. MBO DEFINITION:
Structural approach to organization-wide participative goal setting that aims to serve as a
basis for (A) greater efficiency through systematic procedures, (B) greater employee
motivation and commitment through participation in the planning process, and (C)
planning for results instead of planning just for work. In MBO practice, specific
objectives are determined jointly by managers and their subordinates, progress toward
agreed-upon objectives is periodically reviewed, end results are evaluated, and rewards
are allocated on the basis of the progress. The objectives must meet five criteria: they
must be (1) arranged in order of their importance, (2) expressed quantitatively, wherever
possible, (3) realistic, (4) consistent with the organization's policies, and (5) compatible
with one another. Suggested by the management guru Peter Drucker (1909-2005) in early
1950s, MBO enjoyed huge popularity for some time but soon fell out of favor due to its
rigidity and administrative burden. Its emphasis on setting clear goals, however, has been
vindicated and remains valid.