What Is Management by Objective? - Defining the MBO Process

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: Shared Values in an Organization: Definition & Explanation

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
Your next lesson will play in 10 seconds
  • 0:05 Worker Inclusion
  • 1:02 Defining MBO
  • 2:02 What MBO Delivers
  • 3:01 Lesson Summary
Add to Add to Add to

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Login or Sign up


Recommended Lessons and Courses for You

Lesson Transcript
Instructor: Rob Wengrzyn
Management by objective (MBO) changed the way many companies worked and functioned. With MBO, employees' input was sought out and used to help develop the goals and objectives for the organization.

Worker Inclusion

Let us say that you walk into an office for a meeting and there are other employees in the office, some from your department and some from other departments. The management team then enters the room and tells everyone that they are here to help develop the objectives for the company. They list several areas that they believe the company needs to focus on, as well as ask you for your opinion on these objectives.

As the team works through all of them, they develop a consensus of what objectives the company should have and everyone agrees. They leave the room with an understanding of what the company is doing and why they're doing it. In other words, what the objectives are of the company and why they're beneficial.

Does this sound a little odd? When was the last time your company brought a group of their individual employees into a meeting to discuss objectives? Well, this scenario details management by objective, or what we call MBO. It is a decidedly different way of looking at setting corporate goals and one that truly involves more people in the company.

Defining MBO

The history of MBO dates back to a person by the name of Peter Drucker and his book, The Practice of Management. In that book, Peter developed some groundbreaking concepts, such as MBO. His idea was that if a company banded together to set objectives collectively, then the reward would be much greater than just passing down the objectives from upper management. He believed, and rightly so, that if employees were part of the objective setting process, the benefits would be tremendous and help the company to achieve its goals.

We need to understand that his book was published in 1954. Prior to his book, the managers directed the company, and the employees did what their job said they should do. When MBO came out, the employees now had a voice and input into what the organization was doing. This was an extremely different thought process than what was around at the time. I'm not saying that this book changed the way people managed or set objectives, but it did influence a great many people to look at how they ran their companies and, indeed, changed how companies ran.

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 160 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create An Account