What's MBO?

MBO defined
by Eion Maison

Peter Drucker 1954, in his book The Practice of Management posits that “Management is more than a total of its parts” and that “Objectives are not fate; they are direction. They are not commands; they are commitments. They do not determine the future; they are means to mobilize the resources and energies of the business for the making of the future.”
Management by Objectives (MBO) is a system in which specific performance objectives are jointly determined by subordinates and their superiors with periodic review of progress and allocation of rewards based on the progress. Management is the process of using organization’s resources to achieve the organizational goals through the activities of planning, organizing, leading and control. Therefore, objectives should be set and met.
Many non-profit organizations manage by objectives to achieve their short, medium and long term goals. One such Intergovernmental organization (IGO)- the USAID manage by objectives and according to the USAID Reports from Afghanistan to Zimbabwe this is a successful approach to management.
Other International Organizations (IO’s) use MBO with just the same success because of the comprehensive criteria used for evaluating objectives which is known as the SMART criteria. I actually learned about these criteria from an International Labour Organization (ILO) Training Workshop for Small and Medium Size Enterprises (SME) conference I attended in St. Lucia in 2002: There I was taught the Smart Criteria with says that in evaluation of an SME performance the objectives must be Specific, Measurable, Achievable, Realistic, and Timespecific.
All organizations - profit and non-profit - should look at more than the narrow scope of managing resources and inaddition manage outcomes and even expectations, thus managing more than the total of it’s parts.
There have been many criticisms to Drucker work on MBO. One critic suggests that the phrase ‘management is more than a total of its parts’ is a careless statement (my emphasis). I hasten to disagree with the critic on the basis that many profit maximizing firms like Enron for example, should have been managing by objectives. Had they been so convinced, their managers would not have developed the propensity to collect private rent but instead, would have worked with the specific objectives and demonstrate proper management of the organization and the client’s portfolios thus safe guarding the shareholders interest.
In conclusion, MBO is an effective management strategy for all organizations, be they IO’s, IGO,s, NGO,s, Foundations or business organizations. Despite the type of organization, managing it is more than a sum of all its parts.