Management by Objectives (MBO)

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Definition: Management by Objectives (MBO)

Peter Drucker coined the term Management by Objectives (MBO) in his book, “ The Practice of Management”. Management By Objectives (MBO) is a concept in human resource management that aims at the establishment of a management information system to measure actual performance against defined objectives. The merits of MBO are that it improves employee moral and employee commitment to work, and builds a better communication between management and employees. The MBO theory suggests that having a say in employee goal setting, will ensure better participation and commitment from employees. It was coined in 1954.

There are certain limitations as well to the theory

  • It overemphasizes the setting of goals over the execution of a plan
  • It does not lay much emphasis on the importance of the context in which goals are set. The context considers everything from availability and quality of resources to the influence of stakeholders
  • Doctoring of employee performance results by self centred employees is a possibility making MBO a difficult proposition

 

Hence, this concludes the definition of Management by Objectives (MBO) along with its overview.

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