PROF. ING. DAVID VIZUETA
What is MBO?
Management by objectives (MBO) is a systematic and organized approach that allows management to focus on achievable goals and to attain the best possible results from available resources.
It aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization. Ideally,employees get strong input to identify their objectives, time lines for completion, etc. MBO includes ongoing tracking and feedback in the process to reach objectives.
Management by Objectives (MBO) was first outlined by Peter Drucker in 1954 in his book 'The Practice of Management'. In the 90s, Peter Drucker himself decreased the significance of this organization management method, when he said: "It'sjust another tool. It is not the great cure for management inefficiency... Management by Objectives works if you know the objectives, 90% of the time you don't."
According to Drucker managers should "avoid the activity trap", getting so involved in their day to day activities that they forget their main purpose or objective. Instead of just a few top managers, all managersshould:
* participate in the strategic planning process, in order to improve the implementability of the plan, and
* implement a range of performance systems, designed to help the organization stay on the right track.
MBO managers focus on the result, not the activity. They delegate tasks by "negotiating a contract of goals" with their subordinates without dictating adetailed roadmap for implementation. Management by Objectives (MBO) is about setting yourself objectives and then breaking these down into more specific goals or key results.
The principle behind Management by Objectives (MBO) is to make sure that everybody within the organization has a clear understanding of the aims, or objectives, of that organization, as well as awareness oftheir own roles and responsibilities in achieving those aims. The complete MBO system is to get managers and empowered employees acting to implement and achieve their plans, which automatically achieve those of the organization.
Where to Use MBO
The MBO style is appropriate for knowledge-based enterprises when your staff is competent. It is appropriate in situations where you wish to buildemployees' management and self-leadership skills and tap their entrepreneurial creativity, tacit knowledge and initiative.
Management by Objectives (MBO) is also used by chief executives of multinational corporations (MNCs) for their country managers abroad.
Case in Point MBO in Action at Intel
A Manager's Guide at Intel provides the following directions.
1. Start with a fewwell-chosen overriding objectives.
2. Set your subordinates objectives that fit in with your overriding objectives.
3. Allow your subordinates to set their own key results to enable them to meet their objectives.
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For Management by Objectives (MBO) to be effective, individual managers must understand the specific objectives of their job and how those objectives fit in with the overall company objectives set by the board of directors.
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