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Management by objectives is a process in which a manager and an employee agree on specific performance goals and then develop a plan to reach those goals. First outlined in Peter Drucker’s 1954 book, “The Practice of Management,” management by objectives ensures better employee participation and commitment, while aligning objectives throughout an organization.

For management by objectives to succeed, the objectives must be realistic. Both managers and employees should review past performance and pinpoint any problems. This information should then be used to create goals that address the organization’s specific needs. Finally, the company needs an information system that measures actual performance against the defined objectives.

For example, a large sales organization can aim to increase its customer base by 10 percent over the coming fiscal year, thereby increasing productivity among all employees. On an individual level, a customer-service representative can focus on improving service skills to better assist clients, or support personnel can learn to use new software that communicates pertinent data faster.

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