Let's explore the definition, characteristics, and stages of the Management by Objectives (MBO) goal management method, and identify its pros and cons to find the right goal management approach for your organization.

Management by Objectives (MBO) refers to the process of managing by establishing clear objectives agreed upon by both management and employees. This organizational management technique was introduced by American management scholar Peter Drucker in his 1954 book, “The Practice of Management.”

The MBO model aims to clearly define goals that both executives and employees agree upon, ultimately enhancing corporate performance. With clear objectives and results, and effective communication between managers and employees during the process, MBO is commonly used as a performance evaluation technique alongside OKRs in organizations.

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MBO was designed to establish overall organizational goals and enhance the participation and loyalty of organizational members as they work toward achieving these goals.

The reason MBO is necessary is that by applying the MBO process, both the organization and its members can closely link their goals, ultimately achieving the management objectives. With mutually agreed-upon goals between superiors and employees, performance can be assessed objectively and clearly, allowing everyone in the organization to participate in setting and striving toward goals. This fosters constructive communication and autonomy, providing motivation and impetus for everyone to work together toward achieving these goals.

The application of MBO generally involves a five-step process:

This stage involves analyzing the organizational environment to identify practical goals that can help ensure the organization's survival and growth. Goals are then specified based on the organization's vision and direction.

Building on the foundational data obtained during the goal discovery stage, this phase involves setting the direction and level the organization needs to pursue.

Goals should be established for the entire organization, individual departments, and employees. When setting goals, they must meet the following ‘SMART’ criteria:

This stage involves verifying all factors related to achieving the established goals.

It includes anticipating variables or risks that may arise during the execution of the goals and identifying elements that could impact goal achievement. By going through this validation process, the likelihood of achieving the goals can be enhanced.

After validating the goals, this stage involves establishing specific execution strategies to achieve the goals and implementing them. During this process, performance against the work objectives is assessed, and motivational systems are fully utilized to maximize work efficiency.

Various feedback can occur during the goal execution process. It's essential to evaluate whether the goals can be achieved, consider solutions or alternatives if they cannot, and determine who can provide assistance. Monitoring allows for an assessment of the likelihood of achieving the goals and whether adjustments to the detailed plans for goal achievement are necessary.

In this stage, the progress of the established goals is evaluated to check the current status. Simultaneously, feedback on the success or failure of achieving the goals is provided, rewarding performance and incorporating any failures into the future MBO processes for improvement.

The advantages of applying MBO include enhancing corporate competitiveness as everyone strives to achieve the company's overall goals. Employees can set tailored objectives, which allows them to recognize the significance of their roles within the organization. This fosters a sense of pride in their work and maximizes their strengths and skills during the goal achievement process, leading to improved performance and increased loyalty to the company. Additionally, the goal-setting and feedback processes facilitate frequent communication between management and employees.

Conversely, a disadvantage of applying MBO is that urgent goals often take precedence, leading to relatively less attention paid to aspects like corporate culture, healthy work ethics, and social contributions. Furthermore, employees may feel burdened by the need to achieve set goals within a designated timeframe, which can lead to a reluctance to set higher targets after achieving their goals, potentially diminishing the quality of their work.

We have explored the definition, application methods, advantages, and disadvantages of the goal management method MBO.

We recommend assessing what kind of goal management is necessary for your organization, thoroughly understanding the pros and cons, and finding an appropriate goal management method to implement.

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