Management by Objectives, MBO is a process to get agree upon the objectives within an organization, so that the management and employees agree to those objectives and understand what they really are. Management focuses on the goals with this systematic and organized approach, to achieve the best possible results from the resources that are available. By aligning the targets and subordinate objectives throughout the organization, MBO aims to increase the performance of the organization.

Getting powerful input allows the employees to identify their goals, and time period for the completion. MBO includes in progress tracking and feedback in the process to achieve those objectives. Peter Drucker outlined the MBO in 1954 in his book named as “The Practice of Management’. In the 90s, Peter Drucker decreases the importance of the MBO method, he said, “It’s just another tool. It is not the great cure for management inefficiency... Management by Objectives works if you know the objectives, ninety percent of the time you don’t”.

Managers easily fail to outline, and get agree with their employees on what everyone is trying to accomplish. MBO substitutes for the good intentions, it requires rather accurate written description of the objectives for the period ahead and timelines for their monitoring and accomplishment. MBO requires that the management and the employees agree to what the employee will try to achieve in the period ahead, and the employee accept and agree to the objectives, otherwise the commitment will be lacking.

MBO explains the method of performance management based on the settings of clear and measurable targets, and uses these targets for the evaluation and to review the performance. When MBO is done in a right way, then it is probably the best way to plan for and create effectively performing employees.