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Management by Objectives (MBO) - the 5-Step Process



MBO: Key Advantages and Disadvantages



8 Key Result Areas

Where Managers Must Pursue Clear Objectives

Principles of MBO

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!

Types of Objectives

Routine objectives

Innovation Download PowerPoint presentation, pdf e-book objectives

Improvement objectives

The objectives must be:

focused on a result, not an activity




related to time


MBO Strategy: Three Basic Parts

  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... More



Six MBO Stages

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


Managing for Results: The Eight Perceptions

Managerial Communication

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

What is MBO?

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

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  Download PowerPoint presentation, pdf e-book

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."

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.

Inspiring People: 4 Strategies

Management by Objectives (MBO) is also used by chief executives Download PowerPoint presentation, pdf e-book of multinational corporations (MNCs) for their country managers abroad... More

The Tree of Business Success Download PowerPoint presentation, pdf e-book

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.

Balanced Business System  Download PowerPoint presentation, pdf e-book

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.

Put Values First

Individual Responsibility

Management by objectives is achieved through self-control, the tool of effectiveness. Responsibility for objectives is passed from the organization to its individual members... More

Work Smart and Hard

Setting Objectives

You must ensure that you set the right objectives if you want to achieve the right results. 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... More

Balance between Management and Employee Empowerment

The balance between management and employee empowerment has to be struck, not by thinkers, but by practicing managers.

Leadership-Management Synergy  Download PowerPoint presentation, pdf e-book

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

7 Routes to High Profits

Creating Sustainable Profits: 9 Questions To Answer





  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

Peter Drucker advice

Plans are only good intentions unless they immediately degenerate into hard work.

Peter Drucker

Thought Leader