MBO (Management by Objectives)

management by objectives with developer

Management by Objectives, otherwise known as MBO, is a management concept framework popularized by management consultants based on a need to manage business based on its 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 is the process of defining top company goals and using them to determine employees’ objectives. MBO processes are intended to identify an employee’s main objectives, 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, reinforcing alignment between activity and outcome, which dramatically increases productivity.

Though MBO is intended to help define and manage a set of objectives, the objectives themselves will be at least a little bit different for every company. It allows companies to express their individuality as well as their top priorities and, most important, to execute on them.

MBO best practices

Goals

Goals are set for sole contributors, team leaders, department executives, and the CEO, so 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

Objectives are essential to ensuring that 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

Quantify

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), 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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MBO examples

To help you get a handle on what MBOs look like, we’ve provided some MBO examples for different industries below. Here, we give you an idea of what the actual MBOs might be for a CEO, team leader, and a sole contributor.

Company performance MBO example

Marketing MBO examples

Sales MBO examples

Human resources MBO examples

Software engineering MBO examples

Product management MBO examples

Customer success MBO examples

Customer support MBO examples

Finance MBO examples

Operations MBO examples

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