Management by Objectives (MBO) as a concept first appeared in a 1954 book
The Practice of Management. The author, Peter Drucker, has since become known as one of the world’s most influential business experts. Management by Objectives is
1 “
a management model that aims to improve performance of an organisation by clearly defining objectives that are agreed to by both management and employees”.
2 Peter Drucker saw Management by Objectives as a tool to help organizations identify and achieve goals.
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Decision-making is arguably the most important part of every manager's duties, and focusing on objectives that contribute to the achievement of goals is a crucial ingredient for effective decision-making. The key is to focus on objectives, rather than alternatives, criteria, or attributes.3 The benefits of focusing on objectives include:
- Alignment of the decision to the objectives that when met, are expected to achieve the goal.
- An understanding of the trade-offs between alternatives with respect to objectives. This is a difficult and poorly understood aspect of decision-making.
- Rational decisions. A rational decision is one which best achieves the multitude of objectives of the decision maker(s). 3
Organizations with mature decision-making processes typically define decision objectives through
collaborative brainstorming of the factors that are expected to contribute to achievement of the goal. Then, after the alternatives are identified, a check of the
pros and cons of alternatives may reveal:
- Objectives that may have been overlooked and should be added; and
- Objectives that none of the identified alternatives contribute to. In this case, it may be desirable to:
- Identify more alternatives; and/or
- Remove objectives that no available alternatives contribute to.
1 https://www.cleverism.com/management-by-objectives-guide/
2 Peter Drucker, "The Practice of Management", 1954
3 Forman, Ernest H. and Mary Ann Selly. Decision by Objectives: How to Convince Others That You Are Right. World Scientific Publishing Company, 2001.
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