M B O (Management by Objectives)

M B O
(Management by Objectives)


Management by Objectives (MBO) is also known as Mgt by Motivation, Mgt by Expectation or Mgt by Results.

It is a new phenomenon given by “Peter Drucker”, said that performance of each job should be directed towards the achievement of whole business objective.

MBO means both, philosophy and technique of Management. It is a system for improving performances of individual, manager and the whole enterprise. MBO can be desired as a process in which superior and subordinates jointly set the responsibilities for each individual, which speaks for their performance. The sum total of their individual goal is equal to the common goal of the enterprise. These objectives guide them or tell the employees that what are their duties and further these objectives help them to assess their performance.

Process of MBO:



























MBO is a system for achieving organizational objectives, enhancement of employee’s commitment and participation. Therefore, its process should set objectives for all the employees. So the ultimate responsibilities can be determined. Following process is generally adopted: -

1. Setting of Organisational Objectives: First step in MBO is to determine the main objectives of the organisation. These three questions-Why does the organisation exist? What business are we in? What should be our business? With the help of these questions, top-level objectives are established. To achieve these objectives, departmental objectives are being set. The ultimate objective of every individual is to achieve Organizational Objectives.

2. Key Result Areas (KRAs): Organization’s objectives and Planning Premises together provides the basis for the identification of KRA. KRA indicates the present state of the organizational health and the Top Management perspectives for the future. KRAs applicable to most of the business organizations are: -










3. Setting of Subordinate’s Objectives: The organizational objectives can only be achieved through individual. The process of objectives setting begins with superiors proposed recommendations for his subordinate’s objectives. In turn, subordinate states his objective as perceived by him. Thereafter, final objectives for the subordinate are set by the mutual negotiation between superior and subordinates.

4. Matching Resources: When objectives are set carefully, they also indicate the required resources. In fact, resource availability becomes an important aspect of objective setting because it is the proper application of resources, which ensures objectives achievement.

5. Appraisal: This tries to measure whether subordinates achieving their objectives or not. If not, then why and what are the problems and how the problems can be overcome. Appraisal undertakes as an on going process with a view to find out the deficiency in the working and also to remove it promptly.

6. Recycling: Although appraisal is the last aspect of MBO process, it is used as an input for recycling objectives and other activities. Objectives are neither set at Top nor they set at the Bottom. Objectives setting are a joint process through interaction between superior and subordinates. Therefore, whatever happens at each level, affects other level also.