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What Is Management by Objectives (MBO)? - Definition, Advantages & Disadvantages

What Is Management by Objectives (MBO)? - Definition, Advantages & Disadvantages
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  • 0:05 What is Management by…
  • 0:36 Key Concepts
  • 1:40 Advantages
  • 2:21 Disadvantages
  • 3:30 Example
  • 4:33 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
In this lesson, you will learn about Management by Objectives, its definition and some of its advantages and disadvantages. You will also have an opportunity to reinforce your knowledge with a brief quiz after the lesson.

Definition

Management by Objectives (MBO) is a personnel management technique where managers and employees work together to set, record and monitor goals for a specific period of time. Organizational goals and planning flow top-down through the organization and are translated into personal goals for organizational members. The technique was first championed by management expert Peter Drucker and became commonly used in the 1960s.

Key Concepts

The core concept of MBO is planning, which means that an organization and its members are not merely reacting to events and problems but are instead being proactive. MBO requires that employees set measurable personal goals based upon the organizational goals. For example, a goal for a civil engineer may be to complete the infrastructure of a housing division within the next twelve months. The personal goal aligns with the organizational goal of completing the subdivision.

MBO is a supervised and managed activity so that all of the individual goals can be coordinated to work towards the overall organizational goal. You can think of an individual personal goal as one piece of a puzzle that must fit together with all of the other pieces to form the complete puzzle: the organizational goal. Goals are set down in writing annually and are continually monitored by managers to check progress. Rewards are based upon goal achievement.

Advantages

MBO has some distinct advantages. It provides a means to identify and plan for the achievement of goals. If you don't know what your goals are, you will not be able to achieve them. Planning permits proactive behavior and a disciplined approach to goal achievement. It also allows you to prepare for contingencies and roadblocks that may hinder the plan. Goals are measurable so that they can be assessed and adjusted easily. Organizations can also gain more efficiency, save resources, and increase organizational morale if goals are properly set, managed, and achieved.

Disadvantages

However, MBO is not without disadvantages. Application of MBO takes concerted effort. You cannot rely upon a thoughtless, mechanical approach, and you should note that some tasks are so simple that setting goals makes little sense and becomes more of a silly, annual ritual. For example, if your job is snapping two pieces of a product together on an assembly line, setting individual goals for your work isn't really necessary.

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