MBO; its characteristics and objectives

Category: Bank
Posted on: Monday, September 18, 2017


MBO: The modern model of objective setting is known as the “Management by Objectives” or “MBO”. This model was first discussed by Peter Drucker in 1954 in his book – “The Practice of Management”.

 Meaning and Definition of MBO: MBO is a process where by both superior and subordinate managers jointly identify their common goals or their work unit and define each employee major areas of responsibility and goals with his active participation.

Carlisle – “Management by Objective is a process by which the members of a work unit individually meet with their superior to establish performance related goods.”

Boone and Koontz – “MBO is a prgramme designed to improve employee’s motivation by having them participate in setting their own goals, letting them know in advance precisely have they will be evaluated.”

 Characteristics of MBO :

  • A Philosophy of Management
  • Goal Oriented Approach
  • An Interactive Approach
  • A Comprehensive Approach
  • A System Approach
  • Applies to Total Management System
  • Aims at Optimum Results
  • Simple Universal Approach
  • Multiple Uses
  • Participation and Involvement
  • Common Objectives and Individual Goals



  • Mutual understanding between superior and subordinate.
  • Employees know their expected efforts and their contribution in overall performance.
  • Employees participate in formulation of the plan.
  • Employees know the results of their efforts.
  • Employees want to be fairly rewarded for their performance.

 Objectives of MBO :

 (i) To set organizational units and individual goals by active participation of the all concerned.

(ii) To set verifiable and measurable goals.

(iii) To measure and judge performance.

(iv) To relate individual performances to organizational goals.

(v) To clarify both the job to be done and the expectation of accomplishment.

(vi) To foster the increasing competence and growth of subordinates.

(vii) To enhance communications between superiors and subordinates.

(viii) Serve as a basis for judgment about salary and promotion.

(ix) To stimulate the subordinates motivation.

(x) To serve as device for organizational control.