Management by objectives

Management by objectives (MBO), also known as management by planning (MBP), is a management style involving the defining of specific objectives within an organization and subsequent deciding how to achieve each objective in sequence. It was first popularized by Peter Drucker in his 1954 book The Practice of Management. In this system of management, individual goals are synchronized with the goals of the organization, with employee performance being measured and compared with set standards. According to MBO theory, when employees themselves have been involved with the goal-setting and choosing the course of action to be followed by them, they are more likely to fulfill their responsibilities.

According to George S. Odiorne, the system of management by objectives can be described as a process whereby the superior and subordinate jointly identify common goals, define each individual's major areas of responsibility in terms of expected results, and use these measures as guides for operating the unit and assessing the contribution of each of its members.

History

Peter Drucker first used the term "management by objectives" in his 1954 book The Practice of Management. While the basic ideas of MBO were not original to Drucker, he pulled from other management practices to create a complete system. MBO draws on Mary Parker Follett's 1926 essay, The Giving of Orders. Drucker's student, George Odiorne, continued to develop the idea in his book Management Decisions by Objectives, published in the mid-1960s. MBO was popularized by companies like Hewlett-Packard, which claimed it led to their success.