What is MBO: Steps and Benefits

Managing an organisation is one of the toughest jobs going. You have to consider business models, funding, recruitment processes, employee monitoring, and so much more. As your business grows and settles into different departments, your management strategy will also need to adapt. 

Management by objectives, also known as MBO, is a popular management strategy. The management team and employees define their objectives to improve the organisation’s wider performance. The basis of the strategy is that clear goal setting and action plans can help motivate employees and make sure everyone is on the same page. Peter Drucker first introduced this model in his book The Practice of Management, written in 1954. 

Industry leaders across the globe praise the MBO model. Richard Hammonds, CEO at Hammonds, commented: 

 “The MBO provides us, as third-generation owners, with the ability to protect our well-established brand and values, as well as offering continued opportunities for growth.”

There are various steps outlined in the MBO model. Firstly, you need to revise the original objectives for the company, including the business mission and vision. Hold a meeting with several department managers and run these initial objectives past them. Identify what you need to change and set some provision objectives with your team of managers. These objectives will be based on your interpretation of what the company can achieve within a specific time frame.

Next, you need to deliver these provisional objectives to your employees. Make sure the objectives follow the SMART model – specific, measurable, acceptable, realistic and time-bound. Explain the reasons behind the objectives and the action plan needed to achieve them. The team of managers can now begin working with their departments on establishing more personal goals. Each manager should have a one-to-one conversation with every member of their team. They can discuss their targets and what specific goals are needed to reach larger accomplishments. 

Now, the managers have shared their goals for the organisation, and each employee has outlined their objectives. The manager should discuss how the employee’s personal objectives can help to achieve larger organisational goals. While this benefits the business, it also helps the employee feel valued and empowered within the company. 

Once all objectives and action plans have been decided, you need to determine how to measure their success. For example, you could measure the success of your company goal planning by how many sales you have made since setting them. 

Monitor your employee’s progress and reward individuals when they hit their personal goals. Give them feedback if they need a little motivation and support along the way.

There are numerous benefits to the MBO model. It can help employees to identify their strengths, skills and areas of improvement. Goal setting will keep your organisation focused and on track for success.