Management by objectives (MBO)...

Management By Objective(MBO) was first introduced by Peter Drucker in 1954 in his book, the practice of Management, MBO is both a philosophy and an approach of management. It is a process in which superiors and subordinates sit together to identify the common objectives and set the goals which are to be achieved by the subordinates, assess the contribution of each individual and integrate individual objectives with those of the organisation so as to make best use of the available resources of the organisation.

The essence of an MBO system lies in the establishment of common goals by managers and their subordinates acting together. Each person's major areas of responsibility are clearly defined in terms of measurable expected results (objectives). These objectives are used by subordinates in planning their work and by both subordinates and their superiors for monitoring progress. Performance appraisals are conducted jointly on a continuing basis, with provisions for regular periodic reviews.

MBO as a Philosophy: MBO is a philosophy of management. It is more than a set of techniques. It emphasis on what is to achieve, not how to achieve. It suggests how the best use of available resources may be done to achieve the expected objectives. Peter Drucker writes, "MBO may properly be called a 'philosophy' of management because it rests on a concept of human action, behaviour, and motivation. Finally, it applies to every manager, whatever his level or function, and to every organisation, whether large or small."

MBO as an Approach: MBO is an approach to management. Approach refers to various tools or techniques used in order to achieve the objectives. MBO introduces several new techniques of management. It also enhances the relevance and utility of existing ones. It is thus, a joint application of a number of principles and techniques. It works as an integrating device. Many principles and techniques of planning and control are used in an organisation in the normal situation, but in MBO the focus is more on these techniques.

MBO programs have achieved considerable acceptance, even though they require a great deal of time and energy, because they appear to result in improved performance and higher morale. Today, MBO is used not only as a technique of goal setting but also as a total system of planning, motivation,performance appraisal and self-control.