performance management

MBO In Performance Management

How Is Management by Objectives (MBO) Defined in Performance Management?

MBO in Performance Management is defined as a strategic way of managing that strives to enhance an organisation’s performance by setting clear objectives that both workers and management agree on.

Employee involvement in objectives and strategic plans, according to one hypothesis, is a means to foster improved performance and dedication. Peter Drucker initially proposed the concept in his book, The Practice of Management, published in 1954. Because of an “activity trap,” according to Drucker, employees frequently lose sight of their goals. We lose sight of the original aim when we become too engrossed in our current activity. We agree on shared specified goals as a group using MBO, which helps us avoid the activity trap and stay focused on our objectives.

Monitoring and evaluating each employee’s performance and development against the defined targets is a crucial element in the MBO strategy. Employees are more likely to fulfil their commitments if they are engaged in formulating goals and deciding on a plan of action.

How Does MBO Work?

MBO in performance management is a strategic goal-setting technique based on results. The process begins with a shared conversation to define particular objectives, followed by a collective decision on how to attain them in order. Managers would be able to regulate work correctly and develop a more productive work environment as a result of this.

 As a result of the effects, as employees fulfil each aim, they can see their own successes, strengthening their sense of accomplishment. Employees are more likely to complete their obligations if they were actively involved in goal-setting and discussing with management on how to achieve them. Achieving targets are rated and frequently motivated after they are graded with group feedback.

Why does Management by Objectives Work?

MBO’s effectiveness may be ascribed to a number of key factors. The first is that both management and employees must participate equally. This paradigm will not work unless both participants are aware of their respective duties and involvement. Secondly, MBO emphasises the need for shared decision-making and goal-setting. Leaders contribute expertise and experience to the table, while subordinates assist in establishing the rate and capability with which goals may be met. 

Thirdly, the MBO model has a high level of support. Because of this interplay, employees and managers are compelled to communicate effectively, resulting in better connections and a positive workplace. 

Benefits Of MBOs In Performance Management

The following are some of the benefits of using an MBO:

  • Employees receive feedback through performance reviews: It enables the employee to get stronger in areas where they are weak and demonstrates these areas to them.
  • Improving energy efficiency: MBO has the potential to significantly increase staff performance at work. Proper planning leads to improved performance and increased profits.
  • Career Advancement: Employees have the chance to advance in their jobs. Management is very interested in strengthening and enriching the abilities of its personnel, and it gives several possibilities for such training to take place.

Creating Your Own MBO

Use the following guide to create effective MBOs in performance management:

  1. Set goals for the organisation. This is extremely important. It is recommended that you set one to three long-term objectives. Customer service workers may want to enhance customer experience by 11 per cent and reduce customer call times by three minutes as examples of their goals.
  1. Create objectives for employees: Once you’ve established your goals, you’ll need to devise a plan for how you’re going to get there. Try breaking them down into manageable tasks so that you can keep track of them. It is important to communicate the steps to your team members so that you can all work together towards the goals.
  1. Monitor progress and performance: An MBO can improve management, but it is also important to monitor the performance and progress of staff. You must keep an eye on your progress to ensure that you meet your goals within the allotted time frame. Keep track of progress and performance by creating a tracking sheet and conducting feedback sessions for your team to review issues as well as celebrate successes.
  1. Review performance: Managers can keep tabs on their workers’ progress and efficiency by conducting performance evaluations. If one of your members of the team needs additional help, you can keep tabs on their progress, compile a report, and meet with them one-on-one to go over their work. Make an effort to offer advice that they can immediately put into practice at their place of employment.
  1. Give feedback: Feedback on goals and milestones is a critical component of MBO. Once you’ve completed a goal or step, have a meeting with the team to talk about how you did it and how you can keep moving forward. To keep your staff motivated and productive, give them additional feedback or praise.
  1. Appraisals: In the final stage of the MBO process, employees are evaluated on their performance. It’s a good idea to give each team member an overall evaluation once you’ve met your objectives. In the course of the project, assess how well they performed and where they could improve. Their professional development and advancement can be helped by providing an appraisal.

Examples of MBOs

Human resources

Human resources might set one to four objectives, such as maintaining an employee satisfaction score of 75%. They would talk about how to make this unfold. After HR has developed a strategy, they will consult with their staff. They will come up with fresh ideas to assist them to achieve this aim based on feedback. HR will make sure that the employees do their share as well. HR would then track employee performance to ensure that the aim is beneficial to the company.


Marketing would identify one to three objectives. One of them may be to triple your social media following in a year. When marketing has decided on an action plan, they will discuss it with workers and get feedback on whether the strategy is feasible. They also would pay attention to the objectives of the personnel. They will work with fresh ideas and achieve these goals as a result of feedback. Marketing will assess performance and ensure that the target is met.


The theory of management by objectives has been widely accepted and practised. In my opinion, anyone would be drawn to the idea of conducting business in a positive and productive work environment. Decisions aren’t made in a hierarchical manner, and everyone has a voice. There are numerous advantages to the synergetic approach, and implementing this system is simple and clear to understand. Last but not least, keep in mind the fact that MBO in performance management imposes a need to satisfy both individual and organisational goals, which can quickly become problematic in the absence of strong leadership.

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