Practice Management By Objective (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 the process to reach objectives.

MBO managers focus on the result not the activity. They delegate tasks by "negotiating a contract of goals" with their subordinates without dictating a detailed roadmap for implementation. Management by Objectives (MBO) is about setting yourself objectives and then breaking these down into more specific goals or key results and measurable indicators.

It is called as Key Result Areas (KRAs) or Key Performance Indicators (KPIs) by different companies.

Management by Objectives (MBO) was first outlined by Peter Drucker in 1954 in his book 'The Practice of Management'. In the 90s, Peter Drucker was frustrated when he said: "It's just another tool. It is not the great cure for management inefficiency... Management by Objectives works if you know the objective, 90% of the time you don't."

I can sympathize with Drucker. How true he was in 90's.

In India, many Boards of Directors set the right goals for the enterprise and for the top management. But, it is NOT broken into right subordinate objectives for different functional heads and further down to the last employee in the hierarchy. Briefly, there is no alignment of goals achieved. This is because of lack of focus by CEO/ MD on such an important activity. It is generally delegated to HR department; they lack full functional knowledge to create right KRAs for each empowering employees and implement MBO in full.

MBO remains on paper and it is done for the heck of it just before the rewards to be decided as an annual routine. Most of the time, promotions and increments are drawn out first, based on whims and fancies of the supervisors and then performance appraisals are written to suit. Worst, KRAs are written just before the appraisal and when the timeline for performance is over.

Will efficiency improve? Can you retain best employees? Will company achieve the goal?

Practice MBO in letter and spirit; train all mangers on MBO. Turn organization ‘Goal oriented’.