MBO (Management by Objectives)

management by objectives with developer

MBO stands for Management by Objectives and is a framework designed to manage businesses based on their needs and goals. MBO goals are tailored to meet the needs of today’s fast-growing businesses and fast-paced work environments.

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What is MBO?

MBO defines top company goals and uses them to determine employees’ objectives. MBO processes identify an employee’s main objectives, which are later graded with group input.

This helps all company contributors see their accomplishments in connection to the company’s top priorities as they carry out their tasks. It reinforces alignment between activity and outcome, which dramatically increases productivity.

Though MBO aims to help define and manage a set of objectives, the objectives themselves will be a little bit different for every company. It allows companies to express their individuality and top priorities and, most importantly, to execute on them.

The pros and cons of MBO.

The management by objectives technique has several key strengths, including:

However, MBO can present several disadvantages too:

MBO best practices.


Goals are set for sole contributors, team leaders, department executives, and the CEO. This way everyone has a sense of what they are supposed to be contributing to the team, as well as how it fits into the big picture.


Objectives are essential to ensuring all contributors spend their time at work productively and are working towards a concerted outcome. They also teach those at a company about how much they are truly capable of accomplishing in a set amount of time.

If quarterly goals end up being too easy, they can be adjusted to be more ambitious, or vice versa, during the review process. It is important to set goals that are aspirational, so employees are met with a real challenge.

We recommend from one to three objectives, maximum. This forces employees to discover what their essential priorities should be. As Peter Drucker noted: “Do first things first, and second things not at all.”

Overall, the MBO process consists of five steps:

  1. Set company objectives
  2. Cascade objectives to employees
  3. Monitor
  4. Evaluate performance
  5. Reward performance

Want to know more about how to set achievable goals and objectives? Check out our guide to SMART goals.


Another rule is to quantify your objectives to provide a clear idea of success, which will be important later in the review process. Rules like this are helpful guidelines but do not necessarily need to be applied at all times.

Top company goals are sometimes non-quantifiable. Company culture, for instance, is a valuable asset and one that deserves to be a high priority, though difficult to quantify.

If you’re interested in MBOs, you may also be interested in OKRs (objectives and key results). This is a similar objective setting and tracking management process.

Performance reviews.

The performance review process helps identify mistakes and errors. It also allows for a brainstorming session about what the company might need to change to meet its main objectives in the future.

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Management by Objective examples.

To help you get a handle on what MBOs look like, we’ve provided some MBO examples for different business areas below, as well as some geared towards specific industries. Here, we give you an idea of what the actual MBOs might be for a:

Company performance MBO examples.

Company performance can encompass factors ranging from recruitment and cashflow to carbon emissions and online presence. A few specific goals your business could use as MBO examples include:

Financial and sales performance.

Market share.

Customer service.

Sales performance.


Marketing MBO examples.

Marketing is often data-driven and results-focused. Consequently, it lends itself well to MBO goals. MBO examples for the marketing side of a business could be:

Lead generation and ROI.

Web and social performance.


Human resources MBO examples.

With a solid set of HR examples, you can closely align your company’s MBOs with your staff. For human resources these could include:

Employee satisfaction.

Human resources policy.




Software engineering MBO examples.

Software engineering has its own unique challenges. In this list, you can find MBO examples to fit the sector.

Story points.

Product testing and launches.



Product management MBO examples.

When it comes to product management, launches and revenue need to align with planning and client management. Some MBO examples for product management could include:


Customer and client satisfaction.

Customer success MBO examples.

Keeping close tabs on your customers is an effective way of measuring success. Management by objectives examples for customer success can include:

Satisfaction and service.

Planning and monitoring.


Customer support MBO examples.

A solid customer support game is all about maintaining customer satisfaction, while reducing queries and response rates. Examples of MBO for customer support may cover:




Finance MBO examples.

In the finance sector, you can gear all your staff towards quantifiable financial achievements. Here are a few examples:



Planning and auditing.

Operations MBO examples.

Operations is all about sound planning and processes. Gear your MBO examples towards these with a few ideas:


Products and performance.

Customer service and logistics.

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Frequently asked questions.

What is meant by management by objectives?

Management by objectives (MBO) refers to the process of setting specific objectives for your employees to work towards. This has become a key part of performance management in recent decades.

Supporters of MBO say giving employees clear goals improves motivation. Others suggest it can skew employees’ focus.

Who invented management by objectives?

Author Peter Drucker was the first person to use the term ‘management by objective’. That was way back in 1954 in a book called The Practice of Management.

The technique grew in popularity from the 1960s onwards and entered a golden age in the 1980s and 1990s, making the setting of annual employee objectives the norm.

What is an MBO definition?

MBO is an acronym for Management by Objectives. It can be defined as a management system that measures employees’ performance against a series of set targets or goals to gauge their overall performance in their role.

These objectives are often tied into those set for the overall business or department.