MBO Drucker

Management by Objectives

Drucker

Agreeing on Employee Performance:

Drucker's MBO Approach

Peter Drucker

Management by Objectives (MBO) relies on the defining of objectives for each employee and then comparing and directing their performance against the objectives which have been set. It aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization. Ideally, employees get strong input to identifying their objectives, time lines for completion, etc. MBO includes ongoing tracking and feedback in the process to reach objectives.

It was first outlined by Peter Drucker in 1954 in his book 'The practice of Management'. According to Drucker managers should avoid 'the activity trap', getting so involved in their day to day activities that they forget their main purpose or objective. One of the concepts of MBO was that instead of just a few top-managers, all managers of a firm should participate in the strategic planning process, in order to improve the implementability of the plan. Another concept of MBO was that managers should implement a range of performance systems, designed to help the organization stay on the right track. Clearly, MBO could thus be seen as a predecessor of Value Based Management!

MBO principles are:

Cascading of organizational goals and objectives,
Specific objectives for each member,
Participative decision making,
Explicit time period, and
Performance evaluation and provide feedback.

Drucker also introduced the SMART method for checking the validity of the Objectives, which should be 'SMART':

Specific
Measurable
Achievable
Realistic, and
Time-related.

In the 90s, Peter Drucker put the significance of this organization management method into perspective, when he said: "It's just another tool. It is not the great cure for management inefficiency... MBO works if you know the objectives, 90% of the time you don't."

T I P : Here you can discuss and learn a lot more about intangibles measurement and the Skandia Navigator.

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