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. 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.
  2. 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.
  3. Investing

    Understand Your Role In The Investing Process

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

    6 Ways to Make Sure You Achieve Financial Goals

    Annual goal setting is a necessary yet arduous process. Here's how to stick to your plan.
  5. Small Business

    How Small Businesses Can Hire & Keep Top Employees

    Here is how small business owners can find the right employees, help them succeed and stay engaged at the company.
  6. Retirement

    Enjoy Life Now and Still Save For Later

    Find out how to balance living well today and retiring well tomorrow.
  7. Investing

    5 Things to Know About Investment Policy Statements

    Investment policy statements help guide individual investors. Here are five things to consider when putting one together.
  8. Managing Wealth

    Become Your Own Financial Advisor

    If you have some financial know-how, you don’t have to hire someone to advise you on investments. This tutorial will help you set goals – and get started.
Hot Definitions
  1. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  2. Absolute Advantage

    The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost ...
  3. Nonce

    Nonce is a number added to a hashed block, that, when rehashed, meets the difficulty level restrictions.
  4. Coupon

    The annual interest rate paid on a bond, expressed as a percentage of the face value. It is also referred to as the "coupon ...
  5. Socially Responsible Investment - SRI

    Socially responsible investing looks for investments that are considered socially conscious because of the nature of the ...
  6. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
Trading Center