Management by Objectives: Theory & Steps

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  • 0:04 What Is Management by…
  • 0:39 Theory and Steps
  • 2:14 Setting Objectives
  • 3:02 Examples of Objectives
  • 3:38 Advantages & Disadvantages
  • 4:16 Lesson Summary
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Lesson Transcript
Instructor: Mike Miller
Have you ever been given a set of objectives, but no path on how to get those objectives completed? Well, in management by objectives, you can be given a set of objectives and reasonably accomplish them. In this lesson you'll learn what management by objectives is, the theory behind it, and what the steps are.

What Is Management by Objectives?

Management by objectives is the process in which management clearly defines the goals or objectives for an organization. This organization can review, discuss, and sometimes even negotiate these objectives. Then management, with the help of the organization, will define the path or steps needed to be taken to achieve the objectives. This approach allows for work to be completed in small steps, which will allow employees to feel more comfortable in a calm work environment. Management by objectives has been successfully implemented in industries that have a competent high-knowledge staff, such as information technology.

Theory and Steps

The theory behind management by objective, is well, simple. Employees who have a say in their objectives will have feel more valuable and willing to contribute to the success of the objective. Employees will take ownership of the objectives and fulfill their portion of the objective.

Now, let's take look at the steps involved in management by objectives one at a time:

Step 1- Set Organizational Objectives

In the first step, management reviews business goals and sets the company's objectives for that review cycle. Here management will adequately define the overall business goals.

Step 2- Flow Down of Objectives to Employees

During this step, management will release objectives down to the employees. In the case where someone works in a large Fortune 500 type company, there may be many levels of reviews prior to this reaching the employees. Employees will review the objectives, recommend changes, and come up with a plan of action that will allow for them to reach their objectives.

Step 3- Monitor

During this step, management will monitor employee performance and offer help where needed.

Step 4- Evaluate Performance

At the end of the cycle, management and employees meet to discuss how well the employee has met their objectives. Here management will compare what the employee has completed against what the employee has agreed to perform.

Step 5- Reward Performance

After all the hard work, the employee will be rewarded with raises, promotions, or new responsibilities. Sometimes employees don't believe they were rewarded enough and have issues, but it all comes down to how well they have met their objectives.

Setting Objectives

We've discussed objectives in just about every paragraph so far, but what goes into setting objectives? There are five key components of a good objective. You can easily remember what they are with the acronym SMART:

S is Specific

The specific aspect will clearly define the who, what, how an item is to be done.

M is Measurable

The measurable aspect defines how you will know you have met or exceed what you wanted to do.

A is for Achievable

Achievable means this objective can be accomplished. The objective has to be reachable for the individual to know that it can be met.

R stands for Relevant

Relevant means that is this objective relevant for the employee?

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