Management by objectives (MBOs) is a concept developed by Peter Drucker in his 1954 book The Practice of Management. 1 This method is results oriented and similar to the work standards approach, with a few differences. First, the manager and employee sit down together and develop objectives for the time period. Then when it is time for the performance evaluation, the manager and employee sit down to review the goals that were set and determine whether they were met. The advantage of this is the open communication between the manager and the employee. The employee also has “buy-in” since he or she helped set the goals, and the evaluation can be used as a method for further skill development. This method is best applied for positions that are not routine and require a higher level of thinking to perform the job. To be efficient at MBOs, the managers and employee should be able to write strong objectives. To write objectives, they should be SMART: 2
- Specific. There should be one key result for each MBO. What is the result that should be achieved?
- Measurable. At the end of the time period, it should be clear if the goal was met or not. Usually a number can be attached to an objective to make it measurable, for example “sell $1,000,000 of new business in the third quarter.”
- Attainable. The objective should not be impossible to attain. It should be challenging, but not impossible.
- Result oriented. The objective should be tied to the company’s mission and values. Once the objective is made, it should make a difference in the organization as a whole.
- Time limited. The objective should have a reasonable time to be accomplished, but not too much time.
Setting MBOs with Employees
To make MBOs an effective performance evaluation tool, it is a good idea to train managers and determine which job positions could benefit most from this type of method. You may find that for some more routine positions, such as administrative assistants, another method could work better.