MBO is a management method in which particular goals and objectives are jointly established by managers and employees for every department, project and organization. Responsibilities are assigned to every individual by superiors. Progress is periodically reviewed and the employees are rewarded on goal attainment according to their performance.

The term MBO was first used by PETER DRUCKER (November 19, 1909 – November 11, 2005) in his 1954 classic ‘The Practice of Management’. MBO rose in 1960’s and 1970’s when it was adopted by most publicly traded companies. It was popular and it is popular. MBO method is being used in many organizations.MBO is concerned with collaboratively goal setting and planning. Managers work with their subordinates to establish performance goals that are consistent with higher organizational objectives.

MBO is a process of joint goal setting between a supervisor and a subordinate Typically MBO process is consist of four basic and essential steps, Goals setting is the first step of MBO process. This is the primary purpose of MBO. Organizational objectives and strategies are formulated. Specific objectives are jointly allocated and set among all unit, department or organizational members. Mangers assign responsibilities to subordinates.

[adsense1]Second step of MBO process is develop action plans for every member and team. Action plans define, how can be we achieve our objectives within time frame and allocated resources, which are agreed upon by all members. Then implementation of action plans commences.

Third step is assessment of progress during implementation, review the progress periodically, provide feedback and take corrective actions. Finally, when the implementation process is over after successful achievement of objectives, mangers appraised their subordinates with performance based rewards.

MBO provides a powerful motivational system for the employees of organization. Collaboration and discussion are essential for MBO. Through this process communication among members is greatly enhanced. It provides a systematic management philosophy which facilitates control through the periodic development and subsequent evaluation goals and plans. Some weakness also cause of MBO failure, MBO can useless in times of dynamic environment change. Un-stability of goals can be cause of failure.