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Stephen P. Robbins defines it like "A system in which specific performance objectives are jointly determined by subordinates and their superiors, progress toward objectives is periodically reviewed, and rewards are allocated on the basis of this progress".The concept was originated by Peter Drucker, in the 1950s
The MBO process converts overall objectives into specific objectives that cascade down to organisational units and individual members. MBO also works from the bottom up, as lower level managers jointly participate in setting their goals.
By linking objectives throughout the levels of the organisation, MBO allows each employee to make a specific, identifiable contribution. Four elements are common to all MBO programs:
Goal specificity – The objectives in MBO should be concise statements of expected accomplishments. They have to be written down, and described in terms of tangible objectives which can be measured and evaluated.
Participative decision-making – Objectives must be discussed and agreed – not imposed by higher level management.
Explicit time constraints – There must be explicit agreed time targets, e.g., three months, six months, a year.
Performance Feedback – Frequent and regular feedback supplemented by periodic formal appraisal meetings in order to enable individuals to monitor and adjust or correct their own actions.
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1. Communication is improved as the targets are communicated throughout the company.
2. Everyone’s performance can be measured against the targets and variations analysed.
3. Individuals may be more motivated with the establishment of targets, as they can assess their own progress and performance. They also now understand more clearly their role within the company.
4. It should ensure that everyone within the firm is working towards a common target and not contradicting the actions of others.
5. Training needs can be identified.
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