MANAGEMENT BY OBJECTIVE: Definition, Benefits, Limitations

Benefits, limitations of management by objective by Peter Drucker

The management by objective MBO helps ensure that subordinates’ goals are related to the objectives of the organization. It also provides your employees with a clear understanding of what is expected of them. However, no matter the benefits of management by objective (MBO), there are still limitations. In this piece, you will learn about management by objective by Peter Drucker. But before that, let’s know the meaning of MBO.

Concept Of Management By Objective

During the late 1960s, Peter Drucker coined the phrase “management by objectives” in order to describe a way in which knowledge workers could be managed in a more effective manner than the agricultural and industrial workers who came before us. In order to get the most out of people and get them to work together as a team toward a common objective, management must be effective.

Additionally, Management by objectives is result-base management. Expressly, the fundamental idea of MBO is planning, which denotes that an organization and its members are being proactive rather than merely responding to events and issues. Nevertheless, employees must develop measurable personal goals based on the company goals in accordance with MBO. For instance, a civil engineer would set a 12-month deadline for finishing the housing division’s infrastructure. The organizational goal of finishing the subdivision is consistent with the individual goal. With this in mind, according to practitioners, the main advantage of MBO is that it increases employee enthusiasm and commitment and allows for improved communication between management and employees. Management by objectives isn’t a solution; it’s a way to provide organizations with a process


What is Management by Objective?

Management by objectives (MBO) is a strategic management concept that tries to improve an organization’s performance by clearly identifying objectives that management and employees agree on. Likewise, employee participation and commitment increase as a result of having a say in goal planning and action plans. In addition, management by objective (MBO) is about the way a manager interacts with his staff. Accordingly, management by objective (MBO) relies on integrating different hierarchies within a company. A management by objectives (MBO) process involves deciding what the company’s goals are and agreeing on them between management and the employees. So they know what’s needful and can help create their own. As a result, they meet both their personal and organizational objectives.

To emphasize, management by objective (MBO) is a personnel management strategy for planning and establishing well-defined goals, and objectives   To put it clearly, It’s a way for managers and employees to define, record, and monitor their personal goals in line with corporate goals.

Steps to Management by Objective (MBO)

To implement management by objective (MBO), firms should follow five steps.

  • Determine or adjust organizational goals for the entire company. In particular, this broad outline should be based on the organization’s mission and vision.
  • The organization must educate the employees about the company’s goal or target.
  • Encourage staff members to take part in setting their own goals.
  • Follow the development of your staff. Of course, the fact that the goals are measurable for staff members and superiors means they need to assess how effectively they are as a crucial element of step two.
  • Assessing and awarding staff improvement. Importantly, this step has candid feedback on what each employee achieved and did not complete. 

Goals of Management by Objective (MBO)

Employee expectations cannot be met if company goals are not made clear to them. This encourages micromanagement and gives your staff the impression that you don’t believe in their capacity for success. As workers leave their jobs in search of better opportunities, this over time develops animosity, lowers job satisfaction, and raises the turnover rate. If this circumstance has often occurred throughout your company, it’s essential to evaluate your leadership approach. Do you give your staff the information they require and make it clear what you want from them? Do you present them with chances to develop their skills? If not, change your perspective and organizational culture to one of management by objectives and watch your staff rise to the occasion.

Below are the Goals of Management by Objectives

  • Strategic: In the first step, firm management identified the broad, all-encompassing goals. Of course, it can always be set initially, and the next goals can be on them.
  • Tactical or Team: The more specific objectives are set for teams or departments. For this purpose to be successful, other teams or groups may need to work together.
  • Operational or Individual: particular goals that belong to a single person. In detail, these can vary greatly from one employee to the next.

Benefits of Management by Objective (MBO)

Below are the benefits of MBO

  • Employees appreciate their on-the-job tasks and duties. This is crucial when it comes to the Benefits of Management by Objective (MBO)
  • Each person has a unique collection of key result areas (KRAs) counting on their interests, academic background, and area of discipline.
  • The MBO strategy normally leads to improved teamwork and communication. These are the topmost benefits of Management by Objective (MBO).
  • It ensures that staff understands exactly what is needful of them. One important benefits of Management by Objective (MBO) is that the directors create goals for each member of the team, and each employee takes a list of specific assignments.
  • Each employee has a set of objectives. As a result, each person feels vital to the firm and develops a sense of loyalty to it.
  • Managers assist in confirming that subordinates’ goals are in line with the organization’s objectives.

Limitations of Management by Objective (MBO) 

Below are the limitations of MBO

  • Management by objectives often ignores the current values and working conditions of the business.
  • Goals and objectives take more attention. Especially, managers constantly exert pressure on staff to achieve their goals while missing the usage of MBO for involvement, eagerness to contribute, and management growth.
  • Managers may overemphasize target setting as a successful strategy in comparison to active concerns thereby causing Limitations of Management by Objective (MBO) to be present.
  • The MBO approach downplays the importance of the context in which goals are set. Obviously, the context includes everything from aid availability and efficiency to oversight and stakeholder buy-in thereby also leading to the Limitations of Management by Objective (MBO).
  • Finally, the Limitations of Management by Objective (MBO) is that many managers regard management by objective as a complete method that if executed, can handle all management issues.

Management by Objective by Peter Drucker

Modern corporate management’s forefather, Peter Drucker, is often viewed as the world’s most effective business consultant. In the latter half of the twentieth century, his ideas and thinking changed corporate management. Peter Drucker originally popularized management by objectives (MBO), also known as management by planning (MBP), in his 1954 book The Practice of Management.

In the explanation of Management by Objective by Peter Drucker. Drucker examined why effectiveness was assumed to be a natural and expected outcome in both the classical and human relations schools of management. Nevertheless, he believed that effectiveness was more important than efficiency and was the cornerstone of all organizations. In his 1954 book “The Practice of Management,’ he developed Management by Objectives (MBO). 

Management by Objective by Peter Drucker explains that “What business companies need is a management guide that will give full scope to individual strength and responsibility while also giving common direction to vision and effort, establish teamwork, and blend the goals of the individuals with the common organizational goals.” Management by Objective by Peter Drucker Simply stated that management by objectives is the only theory capable of achieving this. According to Peter Drucker. It should be on note that objectives are required in every area where performance and results have a direct and important impact on the company’s existence and growth.

Peter F. Drucker Identified the Following as the Critical Elements of an Effective Management Goal:

  • Management objectives must be derived from “what our business is, will be, and should be.” To put it another way, they are action commitments, not abstracts.  Undoubtedly, a company’s primary strategy is its objectives.
  • Management goals should be operating in character. Naturally,  it must be capable of serving as both the foundation and the driving force for labor and achievement.  Unquestionably, it should be able to be into precise goals and assignments.
  •  When considering management objectives, numerous objectives must be on a check as a single aim.
  •  It must be selective rather than all-inclusive.  Above all, it must allow for the focus of resources and efforts. It must sift through the aims of a firm to find the fundamentals so that the key resources of men, money, and physical resources can be a focus
  •  The management objective is a need in all areas where the business’s performance and survival are dependent.



In conclusion, MBO makes a lot of sense as a theory: include employees in setting firm goals, and they are more likely to share management’s aims, work harder, and deliver. In detail, the key is to be aware of its flaws, tailor the plan to your organization’s needs, and ensure that everyone is on board and that the objectives are clear and good before proceeding.

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TALENT MANAGEMENT: The Effective Core Procedures(Opens in a new browser tab)

FAQs About Management by Objective

When should Management By Objective (MBO) be applied?

Management by Objective (MBO) works best when it is a component of a larger management strategy.

What are the challengings of Management by Objective?

#1. It is time-consuming

#2. Increase in paperwork

#3. Problem in co-ordination

What does Management by Objective (MBO) aim to achieve?

Management by Objective (MBO)  makes sure that staff members are informed clearly about their duties and responsibilities and are aware of their contribution to the organization’s overall health.