Management by objectives

Management by objectives, also called management by results, is a way of defining objectives inside an organization so management and employees agree on them and understand what needs to be done to reach them. The page presents it as participative goal setting with performance measured against set standards, and notes that Drucker popularized the term.

It also describes the approach as useful for clarifying roles, improving communication, linking individual and organizational goals, and tying pay incentives to results. The limits section says MBO can overemphasize goals, ignore context, and be misused when it is poorly agreed and managed. Deming’s criticism is that weak systems thinking can turn objectives into targets that damage quality.

Reading notes

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• MBO, also called MBR, defines objectives so management and employees agree on them and know what to do to achieve them.
• The term was popularized by Peter Drucker in The Practice of Management.
• Its core is participative goal setting, choosing actions, and comparing actual performance with standards.
• The approach expects employees to understand their roles and responsibilities and how their work supports organizational goals.
• The page lists motivation, better communication and coordination, goal clarity, and stronger commitment to self-set objectives as advantages.
• Objectives can apply to whole departments, the whole company, or individual roles.
• Managers are expected to define the mission and strategic goals of the enterprise.
• Objectives need quantifying and monitoring, often with management information systems.
• Pay incentives are often linked to results in reaching objectives.
• The limits section says MBO can overemphasize goals, underplay context, and produce distorted results if misapplied.
• The approach must be aligned with organizational culture and discussed rather than simply imposed.
• Deming argues that lack of systems understanding can lead to misuse of objectives and poor quality.