Ira aims to become a marketing expert in the future. To achieve this, she has created a detailed plan that includes timelines and milestones. Additionally, she has made an exhaustive list of resources and qualifications she will need to achieve her long-term goal.

Ira plans to manage her tasks and milestones by setting objectives. Similarly, in organizations, departments often set goals by identifying objectives. An effective technique that helps manage and achieve common organizational goals is Management by Objectives (MBO). What is it? Let’s find out.

  1. Understanding Management By Objectives

  2. Advantages And Disadvantages Of Management By Objectives

Understanding Management By Objectives

It was Peter Drucker, one of the most influential management gurus of the 20th century, who developed Management by Objectives in his book The Practice of Management (1954). He believed that effectiveness was more important than efficiency in an organization. His theory suggests that effective use of resources provides employees with a sense of direction and helps them set up clearly defined objectives. The process is characterized by commitment, maturity and responsibility and the goal is to improve an organization’s performance.

There are several advantages of MBO. It provides ample freedom for individuals to create and complete their tasks on their own time. Let’s look at some of the defining features of this systematic, functional and result-oriented strategy:

  • MBO relies on joint efforts and involves participation from both managerial levels and junior employees

  • The ultimate purpose of using the MBO process is to achieve goals, which is why the objectives need to be realistic, verifiable and measurable

  • MBO focuses on what must be accomplished instead of how it can be accomplished; therefore, different people across various levels of management mutually agree on how to accomplish common goals

  • The technique fully utilizes available resources and encourages everyone to think creatively and strategically

  • MBO creates a continuous cycle of improvement with managers providing feedback, guidance and support from time to time

Advantages And Disadvantages Of Management By Objectives

Besides being a philosophy of management, MBO is important in terms of its managerial implications. It helps to synchronize the organization’s objectives with individual objectives. There are both merits and demerits of MBO. Let’s look at the advantages and disadvantages of MBO in greater detail.

  1. Advantages Of MBO

When implemented systematically and consciously, the MBO has the following advantages:

  • As it’s a result-oriented process, MBO encourages managers to do detailed planning and focus on setting and monitoring goals

  • As everyone knows what’s expected of them, there’s little room for ambiguity and confusion regarding responsibilities

  • Establishing measurable targets and performance standards helps define who’s responsible and accountable for what

  • Individuals are more involved and aware of the organizational goals, which motivates them and boosts their morale

  • There is room for improvement as MBO often highlights the gaps in employee training and professional development

  • It improves intra-team communication to a great extent as managers and their team members are involved in the planning and goal-setting process

Therefore, MBO provides an edge to business outcomes with its performance focus. Not only is an employee happy but also the organization enjoys the benefits of greater productivity and business growth.

  1. Disadvantages Of MBO

The limitations of MBO prevent it from being a fully effective system. Some of the disadvantages of MBO are inherent while others arise as you introduce and implement it. Here’s how:

  • It can only succeed when there’s complete support from all levels of management, especially top management

  • Managers may fall into the trap of setting unrealistic expectations in order to achieve outcomes, and this can adversely affect employee morale

  • It increases the scope and quantity of meetings, which in turn increases the amount of paperwork; this may unnecessarily burden managers

  • As goals are highly quantitative, there’s a greater emphasis on short-term goals and there isn’t much room for long-range planning

  • Managers need to possess certain skills such as coaching and counseling, which they may need to learn

  • Achieving group goals is highly difficult as one department relies on another and cohesion isn’t always possible

Despite the limitations of MBO, there are several ways to improve its effectiveness. There needs to be constant checks and balances, in addition to securing support from all levels of management. As it’s a major undertaking, the process may need some time before you see results.

As a manager, if you want to integrate MBO into your organization, you need to first understand how your team functions and their expectations. Harappa’s Navigating Workplaces course will equip you with tools to instill team culture and collaborate with people with different working styles using emotional intelligence. Get your team on the same page for successful cooperation and collaboration. Navigate your workplace smartly!


Explore topics such as What Is Management By Objectives, The Importance Of Organizational StructureTypes of Organizational StructureMatrix Organizational Structure & The Difference Between Functional and Divisional Structure from Harappa Diaries and understand organizational culture and needs.

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