Management by Objectives (MBO) is a process of identifying objectives in a company with the intention that management and employees agree to the objectives and know what they have to do within the organization.
Management by Objectives – MBO Process Steps
Initially, organizations have to set corporate objectives. Corporate objectives determine the motive and mission of the business and may be explained by trying to answer the question ‘what is our business’. Following out of the corporate objectives are the long and short-term strategic objectives.
Planning allows the objectives to be transformed into reality. The objectives may be accomplished provided that the manager transforms them into certain action plans spelling out the different steps or functions to be performed and the specific time period within which these must be done. There are 4 general steps linked to each action plan:
- Selecting strategies that are suitable for the objectives
- Delegating responsibility for attaining the objectives
- Allocating resources for accomplishing the objectives
- Scheduling particular activities to attain optimum utilisation of resources.
Regular performance review is among the primary functions of MBO. The main focus of the performance review is on:
- future corrective action
- frequency of reviews