Next video:
Loading the player...

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.

Related Articles
  1. Small Business

    5 Ways to Create a Bonus Structure for Your Small Business

    Understand what goes into a good small business bonus structure. Learn about how a small business can create a bonus structure that attracts employees.
  2. Financial Advisor

    Asset Manager Ethics: Independence and Objectivity

    The best practices in maintaining independence and objectivity should be adopted by firms to protect investment professionals from pressure both from within and outside the firm.
  3. Small Business

    How to Conduct an Effective Performance Review

    A proper performance review can be a very useful tool for both managers and employees.
  4. Financial Advisor

    Asset Manager Ethics: Investment Process and Actions

    Managers, in developing their investment process, need to determine some “general rules” that make it meaningful. We offer six.
  5. Investing

    Having A Plan: The Basis Of Success

    It ensures that you have a realistic outlook, and a solid strategy. We show you why and how.
  6. Investing

    Understand Your Role In The Investing Process

    Knowing what to expect when managing your assets will help you achieve your financial goals.
  7. Personal Finance

    To Achieve Your Goals, Remember to Be SMART

    Setting goals instead of resolutions and using the SMART approach will help you attain your goals.
Hot Definitions
  1. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
  2. Contango

    A situation where the futures price of a commodity is above the expected future spot price. Contango refers to a situation ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Acid-Test Ratio

    A stringent indicator that indicates whether a firm has sufficient short-term assets to cover its immediate liabilities. ...
  5. Floating Exchange Rate

    A country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that ...
  6. Taxes

    An involuntary fee levied on corporations or individuals that is enforced by a level of government in order to finance government ...
Trading Center