management by objectives

Management by Objectives

A goal-oriented management tool in which managers and employees come together to agree upon a set of objectives to achieve for the company's short-, medium-, or long-term future. Management by objectives is a multi-step process in which previous goals are periodically evaluated and changed with employee input, then put into practice with occasional performance evaluation and rewards to high achievers. Goals are expected to be explicitly defined by the SMART Principle. That is, goals must be Specific, Measurable, Achievable, Relevant, and Time-Specific. Critics of management by objectives argue that the tool only works when goals are defined more specifically than is usually possible. Proponents argue that this arrangement helps employees avoid a workaday mentality in which activities are performed without any reference to greater objectives. The term 'management by objectives' was coined and first explained by Peter Drucker in his 1954 book, The Practice of Management.

management by objectives (MBO)

an approach to MANAGEMENT, popularized by American management writer Peter Drucker (1909 -), which emphasizes the need for clear organizational objectives which can be incorporated in the actions of individual managers. In Drucker's view organizations have a multiplicity of objectives; these should be clarified and prioritized so that all managers understand what the most important goals of the organization are. Then individual managers should set objectives for themselves, in conjunction with their superiors, which will assist in meeting organizational goals. This approach was popular in the 1960s and 1970s but subsequently fell from favour because all too often objectives were imposed on managers rather than generated by them, and because the extent to which objectives were met was often used simply to evaluate managers rather than as a basis to improve performance. Genuine commitment was difficult to engender in these circumstances. This approach to management has made a comeback recently with the emphasis attached to objective-setting in the PERFORMANCE APPRAISAL process.