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Does Management by Objectives (MBO) Still Work As an Approach Today?

June 26, 2013 by Dr. Jon Warner in Goal Setting

Does Management by Objectives (MBO) Still Work As an Approach Today?

The author and widely regarded father of modern management methods, Peter Drucker evolved the concept of Management by Objectives or MBO as it became known for short in the mid 1950’s in his book “The Practice of Management.” The concept was an immediately and widespread hit in medium to large sized organizations in particular and it enjoyed decades of use as a primary way to set goals and objectives across an organization of any kind. 

What is MBO and what are its advantages and disadvantages?

MBO is the process of setting goals or objectives in the organization to give a sense of direction to its employees. It allows these employees to know what they are specifically supposed to do at the workplace. It seeks to do this by carefully defining roles and responsibilities for each employee and then guides them to evolve their future course of action in a given timeframe.

The main advantages and disadvantages of the MBO approach are shown in the table below:

Advantages Disadvantages
MBO makes a clear link between individual effort and the organization’s vision and mission. MBO can be challenging and lengthy to implement. This is mainly because goals need to be transmitted from level to level with agreement, thus make the process slow.
MBO seeks to create clarity for individuals in relation to their tasks and projects they perform and how these benefit the team and the whole organization. MBO needs the organization’s full commitment, and it also needs an underlying system for tracking goals and performance
MBO introduces many of the key techniques needed for effective team management, including team briefing, goal setting, performance appraisal, delegation, and feedback. The MBO process increases comparisons between individuals at the workplace with some employees only doing what their superiors ask of them and no more.
MBO helps to avoid job/task mismatches and unnecessary job/task overlap and confusion. Where objectives are imposed rather than agreed MBO can reduce morale and if targets are overambitious and can then cause high levels of stress.
MBO helps to ensure better communication and coordination amongst the employees. The process of determining and agreeing targets can be very bureaucratic and time consuming due to the number of meetings needed.
Management by Objectives often leads to well defined hierarchies at the workplace and helps to create transparency at all levels. In certain organizations, depending on its corporate culture, MBO can lead to short-termism with targets becoming more focused on quantity rather than quality.
The MBO Process can lead to highly motivated and committed employees. As circumstances change, MBO targets can quickly become outdated or unrealistic.

The above table tends to show a mixed picture for MBO, although its relative success seems to have historically been based on how well it was implemented and maintained over time. Like most systems, its impact and usefulness inevitably declines with neglect.

So, where is the MBO process today?

In the last 10-15 years or so, attention to and use of MBO has diminished. But is this because, like many management concepts, it has outlived its usefulness, been superseded, or it has simply been neglected. To some extent there are also other techniques that have come along to both build on its foundations and taken it further. One popular example of this is Kaplan and Norton’s “balanced scorecard” approach, which proposed a more sophisticated framework to be used.  Here, the same emphasis exists on setting clear goals and linking them carefully at all levels, but greater care is taken to ensure that there is a balance in outcomes between people/learning measures, process measures, customer measures and finally financial measures of success.

Summary

Management by Objectives is still around and can be a useful approach if well-set up and maintained. However, the workplace has changed considerably in recent years and either greater implementation and system maintenance care needs to be taken or more sophisticated systems (such as the balanced scorecard approach) may need to be adopted instead.

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About Dr. Jon Warner

Dr. Jon Warner is a prolific author, management consultant and executive coach with over 25 years experience. He has an MBA and a PhD in Organizational Psychology. Jon can be reached at OptimalJon@gmail.com

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About the Editor and Primary Author

Jon Warner

Jon Warner is an executive coach and management consultant and in the past has been a CEO in three very different companies. Read more

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