MBO Full Form

MBO full form is Management by Objective. MBO is a strategic management method that involves setting specific, measurable, achievable, relevant, and time-bound (SMART) goals for employees and then giving them activities with goals. It was first introduced by Peter Drucker in his 1954 book The Practice of Management, post which MBO became a popular management technique in organizations around the world.

What is the full form of MBO?

As mentioned above the full form of MBO is  Management by Objective. Management by objective is a process in which the top and bottom managers of the company jointly determine the goals of the business. It is a quantitative and effective management method in which measurable goals are established in consultation with subordinates and determined according to each individual's contribution. This concept was first introduced in 1954 by "Peter F. Drucker" in his book "The Practice of Management". He is also known as the father of MBO. MBO instructs the process to reach the set goals in a timely manner. MBO also conducts a critical review of the organization's ongoing operations.

History of MBO

Peter Drucker first used the term "management by objectives" in his 1954 book Practice of Management. But the concept of MBOs was not originally by Drucker, they were borrowed from other management systems to create an entire "system". This concept was presented in Mary Parker Follett's article ‘Giving Orders’. After Drucker's student, George Odiorne, developed the term and the concept, he developed the concept in his book Management Decisions by Objective which was published in the mid-1960s. MBO gained its popularity from companies such as Hewlett-Packard because it claims that MBO led to its success.

Benefit of MBO

MBO, full form of which is Management by Objective, encourages employees to take responsibility for their work and focus on achieving specific results. By setting goals that are later aligned with the organization's strategy it also helps employees to see how their work contributes to the overall success of the company. MBOs also help in increasing employee motivation and productivity by providing a clear framework for performance appreciation and feedback. On the other side, the MBO process can lead to stress and demotivation if goals are not set properly or if employees do not have the necessary resources to achieve them.

Goal of MBO

Management by objectives (MBO) uses quantitative methods or objectives to evaluate the performance of the company and its employees. By comparing actual production to planned, managers can identify problems and improve performance. Both managers and employees understand and agree on the standards and their objectives

MBO’s Process

Below are some steps that are included in the process of Management by Objective (MBO full form)

1. Goal Setting: Managers and employees work together to set specific and measurable goals that align with the overall strategy of the organization.
2. Planning: Employees develop action plans to achieve goals and identify resource needs.
3. Implementation: Employees implement necessary plans and complete tasks to achieve goals.
4. Evaluation: Managers and employees meet regularly to review progress toward goals and make necessary adjustments to action plans.
5. Feedback: Managers provide regular feedback to employees or staff on their performance and progress toward goals.

MBO’s Actions 

Management by objective (MBO) consists of actions that every business should follow. Below mentioned are some actions of MBO.

1. Establish the organization’s/institution’s aim: Create or update organizational goals for the entire company. The company's mission and vision should be the basis for overall expansion. Goal setting serves many functions and is important for the success of any company. Different types of management should be included when defining objectives.
2. Brief Staff about Objective: Communicate the organization's goals to employees or staff. Once managers have briefed employees on goals, plans, and strategies, they can begin to develop goals with employees. Employees will discuss their goals with their managers in one place, how they can achieve these goals in a given time, and the resources they need. They may have the initial discussion about what goals the organization or department will decide to achieve.
3. Regular check for good results: Encourage employees to participate in the process of setting their own goals. After communicating the organization's larger goals to employees at all levels, employees should be encouraged to help shape their goals. The higher the support, the higher the motivation of the employees. Management according to strategic goals is important not only in terms of making managers effective but also in terms of monitoring the growth and success of all employees in the organization.
4. Evaluation of performance: Pay close attention to employee development. Measurability of goals is important for employees and managers to evaluate the effectiveness of achieving the goal. The MBO framework also tells that relevant management should be involved in performance reviews.
5. Make recommendations: The most important step in goal management is continuous feedback on performance and goals because it allows employees to monitor and change their behavior. In addition to regular feedback, assessments are conducted for leaders and managers to discuss progress toward achieving goals and receive additional feedback.

Advantage of MBO

• Giving employees goals increases their importance, productivity, and job loyalty.
• Develops good communication between staff & management
• Employees enjoy their jobs and set goals that they know are achievable and match their strengths, skills, and education. 
• Management can set goals that will make the company successful.
• MBO helps define organizational structures and roles.
• It encourages employees to be determined to reach targets in advance or within the time period.

Disadvantages of MBO

• It is a very time-consuming process. 
• Work productivity may be adversely affected by short-term use, as employees are encouraged to use whatever means necessary to achieve goals.
• MBOs focus completely on goals and targets. Other areas of the company such as leadership, good work culture, and collaboration are often neglected.
• Employees feel heavy strain because they have to meet goals in a given time period
• If management relies solely on MBOs for all management functions, problems may arise in areas that are not suitable for Management by Objectives (MBO full form). 
• It will be unsuccessful if the right instructions are not provided to fulfill the organization’s goal.
• It promotes inflexibility. 
• It requires a lot of paperwork.

Written By: Deepit Mathur