Effective Management:

Managerial Leadership

Management by Objectives (MBO)

Concept by Peter Drucker

Executive summary by Vadim Kotelnikov personal logo Vadim Kotelnikov,, Founder, Ten3 Business e-Coach Your 360 Achievement Catalyst!






"MBO is one of the rational school of management's successful products." The Economist


8 Key Result Areas Where Managers Must Pursue Clear Objectives

Management by Objectives (MBO) Principles

2 Questions You Need to Answer To Get The Whole Process Rolling

  1. Where do I want to go ? (What is the objective?)

  2. How will I pace myself to see if I am getting there? (What are my milestones, or key results?)

Make sure that the answers are precise!

  Keep Your Computer-tired Eyes Healthy


Types of Objectives1

The objectives must be:

  • focused on a result, not an activity

  • consistent

  • specific

  • measurable

  • related to time

  • attainable

MBO Strategy: Three Basic Parts5

  1. All individuals within an organization are assigned a special set of objectives that they try to reach during a normal operating period. These objectives are mutually set and agreed upon by individuals and their managers.

  2. Performance reviews are conducted periodically to determine how close individuals are to attaining their objectives.

  3. Rewards are given to individuals on the basis of how close they come to reaching their goals.

Six MBO Stages

  1. Define corporate objectives at board level... More


Personal Empowerment

The Four Powers you need to do an excellent job:

  1. Freedom to challenge everything and anything

  2. Continuous training and development on the job

  3. Knowledge of, and faith in, the organization's mission

  4. The ability to achieve and see results

MBO: Key Advantages and Disadvantages5


  • MBO programs continually emphasize what should be done in an organization to achieve organizational goals.

  • MBO process secures employee commitment to attaining organizational goals.


  • The development of objectives can be time consuming, leaving both managers and employees less time in which to do their actual work.

  • The elaborate written goals, careful communication of goals, and detailed performance evaluation required in an MBO program increase the volume of paperwork in an organization.

Managing for Results: The Eight Perceptions

  • Results come from exploiting opportunities, not solving problems... More

Managerial Communication

  • Guiding: Give people clear guidelines on the results that are expected... More


29 Obstacles To Innovation

  • Micromanagement

  • Ensure that highly qualified people do mundane work for long periods... More

Inspirational Leadership

10 Roles

  1. Motivate, inspire and energize people, recognize achievements... More

What is MBO?

Management by objectives (MBO) is a systematic and organized approach that allows management to focus on achievable goals and to attain the best possible results from available resources.

Stretch Goals

Inspiring Culture: 5 Elements

It aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization. Ideally, employees get strong input to identify their objectives, time lines for completion, etc. MBO includes ongoing tracking and feedback in the process to reach objectives.

Management by Objectives (MBO) was first outlined by Peter Drucker in 1954 in his book 'The Practice of Management'. In the 90s, Peter Drucker himself decreased the significance of this organization management method, when he said: "It's just another tool. It is not the great cure for management inefficiency... Management by Objectives works if you know the  objectives, 90% of the time you don't."

Core Concepts

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. Instead of just a few top managers, all managers should:

  • participate in the strategic planning process, in order to improve the implementability of the plan, and

  • implement a range of performance systems, designed to help the organization stay on the right track.

Managerial Focus

MBO managers focus on the result, not the activity. They delegate tasks by "negotiating a contract of goals" with their subordinates without dictating a detailed roadmap for implementation. Management by Objectives (MBO) is about setting yourself objectives and then breaking these down into more specific goals or key results.

Main Principle

The principle behind Management by Objectives (MBO) is to make sure that everybody within the organization has a clear understanding of the aims, or objectives, of that organization, as well as awareness of their own roles and responsibilities in achieving those aims. The complete MBO system is to get managers and empowered employees acting to implement and achieve their plans, which automatically achieve those of the organization.

Inspiring People: 4 Strategies

Put Values First

Where to Use MBO

The MBO style is appropriate for knowledge-based enterprises when your staff is competent. It is appropriate in situations where you wish to build employees' management and self-leadership skills and tap their entrepreneurial creativity, tacit knowledge and initiative.

Management by Objectives (MBO) is also used by chief executives of multinational corporations (MNCs) for their country managers abroad.

Smart Executive

 Case in Point  MBO in Action at Intel

A Manager's Guide at Intel provides the following directions.

  1. Start with a few well-chosen overriding objectives.

  2. Set your subordinates objectives that fit in with your overriding objectives.

  3. Allow your subordinates to set their own key results to enable them to meet their objectives.

Leadership-Management Synergy

To maximize your long-term success you should strive to be both a manager and a leader and to synergize their functions. Merely possessing management skills is no longer sufficient for success as an executive in today's business world. You need to understand the differences between managing and leading and know how to integrate the two roles to achieve organizational success... More

Leader 360

Innovation Management Policies for Large Corporations

By: Bill Gates, Founder of Microsoft

  • Prevent competing missions or objectives... More

25 Lessons from Jack Welch

Loose-Tight Leadership

The Jazz of Innovation: 11 Practice Tips

Setting Objectives

For Management by Objectives (MBO) to be effective, individual managers must understand the specific objectives of their job and how those objectives fit in with the overall company objectives set by the board of directors.

The managers of the various units or sub-units, or sections of an organization should know not only the objectives of their unit but should also actively participate in setting these objectives and make responsibility for them.

The review mechanism enables leaders to measure the performance of their managers, especially in the key result areas: marketing; innovation; human organization; financial resources; physical resources; productivity; social responsibility; and profit requirements... More

The Tree of Business Success

6Ws of Corporate Growth

Systemic Innovation: 7 Areas

Balance between Management and Employee Empowerment

The balance between management and employee empowerment has to be struck, not by thinkers, but by practicing managers. Turning their aims into successful actions, forces managers to master five basic operations:

Managing for Results

The only place where meaningful management results can be won is the outside world.

Managing for results is expansion of Management by Objectives (MBO) into the marketplace. It is the theory and practice of how to produce results on the outside, in the market and economy.

To achieve results, you should develop a solid, sound, customer-focused, and entrepreneurial strategy, aimed at market leadership, based on innovation, and tightly focused on decisive opportunities... More

Building a High-Growth Business: 10 Rules

Balanced Business System

Individual Responsibility

Management by Objectives (MBO) creates a link between top manager's strategic thinking and the strategy's implementation lower down. Responsibility for objectives is passed from the organization to its individual members. It is especially important for knowledge-based organizations where all members have to be able to control their own work by feeding back from their results to their objectives.

Management by objectives is achieved through self-control, the tool of effectiveness. Today the worker is a self-manager, whose decisions are of decisive importance for results.

In such an organization, management has to ask each employee three questions:

  1. What should we hold you accountable for?

  2. What information do you need?

  3. What information do you owe the rest of us?

Deming's 14 Point's Plan for Total Quality Management

Point 12: Remove the barriers that rob hourly workers, and people in management, of their right to pride of workmanship. This implies, abolition of the annual merit rating (appraisal of performance) and of management by objectives... More

8 Rules for Quality Management

Areas Targeted by TQM in Japan

 Case in Point  Canon Production System (CPS)

The Canon Production System (CPS) includes:

  • Management by objectives at all levels of the hierarchy... More





  1. "Management: Tasks, Responsibilities, Practices", Peter Drucker

  2. "The Frontiers of Managemen", Peter Drucker

  3. "Managing in Time of Great Change", Peter Drucker

  4. "Management Challenges for the 21st Century", Peter Drucker

  5. "Modern Management", Ninth Edition, by Samuel C. Certo

  6. "Essential Manager's Manual", Robert Heller and Tim Hindle

  7. The Practice of Management", by Peter Drucker

  8. The Effective Executive, Peter Drucker

  9. Managing for Results, Peter Drucker

  10. 5 Questions Every Manager Should Periodically Ask About Himself, Peter Drucker

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