Management By Objectives - MBO

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DEFINITION of 'Management By Objectives - MBO'

A management model that aims to improve performance of an organization by clearly defining objectives that are agreed to by both management and employees. According to the theory, having a say in goal setting and action plans should ensure better participation and commitment among employees, as well as alignment of objectives across the organization. The term was first outlined by management guru Peter Drucker in 1954 in his book "The Practice of Management."

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BREAKING DOWN 'Management By Objectives - MBO'

A key tenet of management by objectives is the establishment of a management information system to measure actual performance and achievements against the defined objectives. The major benefits of MBO are that it improves employee motivation and commitment, and ensures better communication between management and employees. However, an oft-cited weakness is that MBO unduly emphasizes the setting of goals to attain objectives, rather than working on a systematic plan to do so.

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