Understanding MBO (Management By Objectives) and Its Application in Organizations – Management By Objectives or often abbreviated as MBO is a systematic and organized approach that emphasizes the achievement of organizational goals. In the long run, the application of the MBO allows management to change the mindset of the organization to be more results-oriented.
The concept of Management by Objective (MBO) was first put forward by Peter Drucker in his book entitled “The Practice of Management” in 1954. According to Peter Drucker, the determined Organizational Objectives must go through a processing agreement between Management and its Employees, not imposed from above.
This method will be more effective in delegating authority to a large organization so that all employees understand and are committed to achieving the goals of the organization. The goals in the organization are made in stages starting from the overall Organizational Goals, division goals, departmental goals to the individual employee’s self.
Please note that the MBO is a management approach that focuses on results, not on the activities or the implementation process. Delegated tasks do not have a fixed Roadmap or “method” in their implementation. The implementation is based on the situation and is dynamic.
To identify and establish organizational goals, Top Management organizations usually use Goal / Targeting Techniques such as the SMART Method (Specific, Measurable, Achievable, Relevant and Time-Specific) or GQM (Goal, Question, and Metrics).
MBO can be applied in various business fields, including production, service, marketing, research and development, health, information systems, and financial business fields.
Benefits of Implementing MBO
The main principle of MBO is the clarity of responsibilities and roles of employees in the organization so that they clearly understand the activities that must be carried out to achieve organizational goals. Some of the benefits gained from implementing this MBO are as follows:
- Increased Work Motivation, involving employees in making decisions about organizational goals will increase commitment and job satisfaction for the employee concerned.
- Better coordination and communication. Interaction in setting organizational goals can maintain good relations and harmony between management and employees.
- Clarity of Organizational Purpose
- Employees or subordinates are highly committed to the goals they set themselves rather than the goals / objectives imposed by others.
Steps to Implement MBO
The following are some important steps that must be taken in implementing MBO:
- Determine the Main Goals and Objectives of the Organization
- Determine the Goals and Objectives for each employee or department
- Monitor the progress of the implementation and work performance of employees
- Evaluating Performance
- Give feedback
- Give awards to employees or departments that achieve the stated goals.