Focused Results: Objectives‑Based Management

Management by objectives (MBO) is a management technique that uses strategic planning to set clear and measurable objectives between employees and the business and monitors progress toward those objectives. This is a strategic approach that allows employees to align their goals with company objectives to have more say in what they do.

The management by objectives style focuses on defining goals, outlining action plans, and reviewing and evaluating performance to enhance employee motivation, improve communication between employees and their managers, and drive efficiency by aligning objectives with company goals.

By aligning team or team member goals with company objectives, you can establish better communication within your organization. MBO makes it easier for employees to understand what they should be working on and when, which makes managers less likely to micromanage because of ongoing communication and feedback.

If the management by objectives definition discussed above isn't clear enough, let's break the process down into its various components:

Establish organizational goals

Before you can set goals for teams or individual staff members, you must determine your organization's objectives.

For instance, your company goal might be to increase sales by a certain percentage in a quarter. Then, you'll need to determine how each team or team member will contribute to that goal.

Set individual objectives

After establishing defined objectives for the company, you can align those goals with individual employee goals. The employee's or team's objectives are aligned with organizational objectives and established collaboratively between employees and their managers.

Create an action plan

Once the company and individual goals are established, managers and employees develop action plans to outline the steps or strategies used to achieve those goals.

The action plan should consist of deadlines to improve time management, timelines, and other pieces of information managers and staff members find helpful, providing clear information throughout every step of the process.

Monitor progress

Performance monitoring against objectives tracks progress and assesses results to identify roadblocks or bottlenecks while giving you the opportunity to revisit your goals.

Monitoring progress allows managers to provide ongoing feedback. This feedback and continuous communication allows employees and leaders to discuss the assigned goals, get guidance, and address challenges.

Evaluate and reward employees

Once the goal is met or the project is completed, a performance appraisal evaluates the team member's goals and performance while giving managers a chance to provide feedback and address areas of improvement.

Managers can also recognize and reward an employee's contributions, which contributes to employee motivation and boosts company morale.

Management by objectives improves performance and communication within organizations by setting clear goals and monitoring performance while providing consistent and constructive feedback throughout the process. However, while many businesses benefit from clearer communication and aligning company objectives with employee goals, it's not the right solution for every organization. Let's take a look at a few pros and cons of MBO.

Pros of MBO

MBO can offer the following benefits to your company:

• Improves organizational performance: MBO aligns individual and team goals with overall organizational objectives. By setting clear and measurable objectives, employees are motivated to work towards achieving them, leading to improved performance and increased productivity. Focusing on results and outcomes promotes a culture of accountability, making employees more engaged in their work.
• Increases employee engagement: One of the best ways to engage employees is to involve them in decision-making. This approach involves employees in the goal-setting process, allowing them to have a say in defining their objectives and action plans. With this management approach, employees can set their own objectives and have them approved by managers or work directly with managers to set goals. When employees have a clear understanding of their roles, responsibilities, and how their work contributes to company performance, they're motivated to perform at their best.
• Enhances company communication: The MBO approach emphasizes open communication between managers and employees. Ongoing feedback and open communication improve understanding of expectations and allow employees and managers to identify issues quickly.
• Provides a structured approach to goal setting: MBO is structured. By defining specific, measurable, achievable, relevant, and time-bound (SMART) objectives, organizations can set clear benchmarks for success. This structure also empowers employees to set goals for themselves that align with overall business objectives to lead their work and keep them engaged in various tasks.

Cons of MBO

Unfortunately, no management approach is perfect, and MBO may not work for your business. A few potential drawbacks of management by objectives include:

• Overemphasizes short-term, quantitative goals: MBO prioritizes short-term, quantitative goals over long-term strategic ones. Only focusing on measurable outcomes means managers prioritize targets at the expense of other priorities. By including qualitative factors in goal setting, MBO can be more comprehensive and align with all the needs of the business.
• Time-consuming: MBO can be time-consuming because it's collaborative; managers and employees must come together to create goals and communicate regularly throughout tasks and projects. These regular meetings can divert attention away from other important responsibilities of both individuals. To make the process less time-consuming, businesses can simplify and clarify each process and use project management tools for feedback and continuous communication.
• Lack of flexibility: The MBO approach is less flexible than other management styles because it depends on objectives and action plans. While it provides structure, it can limit adaptability in workplaces that need to be dynamic. Encouraging employees to identify bottlenecks and alternative approaches on their own can help make this approach more flexible. While the MBO process requires managers to monitor progress more closely, employees should still be empowered to perform work on their own.
• Administrative burden: Because MBO requires coordination, collaboration, and documentation, it often comes with more administrative tasks than other management styles. Businesses can reduce some of the administrative tasks involved in MBO by using technology for tracking progress and providing feedback. While there will always be some administrative tasks involved in the management by objectives framework, you can reduce time-consuming and repetitive tasks like tracking by using a robust project management tool.

Management by objectives examples

The MBO framework is goals-based, allowing managers and employees to monitor objectives throughout a project or task.

Management by objectives examples include the following:

Marketing

Here's an example of how MBO can be used for marketing to set effective marketing goals and manage projects:

Objective: Increase brand awareness through digital marketing.

Action Plan:

• Develop a comprehensive social media strategy to increase followers, engagement, and brand visibility.
• Implement targeted email marketing campaigns to nurture leads and drive conversions.
• Create high-quality content, including blog posts, videos, and infographics, to educate and engage the target audience.
• Optimize the website for search engines (SEO) to improve organic traffic and visibility.

Evaluation:

• Monitor social media analytics to track reach and engagement.
• Analyze email marketing metrics, including open rates, click-through rates, and conversion rates.
• Track website analytics to measure increases in organic traffic, time on site, and conversion rates.
• Conduct customer surveys to gauge brand awareness.

Customer Service

Here's how you can use the management by objectives process to improve customer service within your organization:

Objective: Improve customer satisfaction ratings by 20% within six months.

Action Plan:

• Implement a training program to enhance customer service skills, including active listening, problem-solving, and empathy.
• Establish standards and response time targets for different customer inquiries and issues.
• Develop a knowledge base or FAQ resource to provide quick and accurate responses to common customer queries.
• Implement a customer feedback system to collect and analyze feedback, identifying areas for improvement.

Evaluation:

• Monitor customer satisfaction ratings through surveys or Net Promoter Score (NPS).
• Track key performance indicators (KPIs) such as first response time, resolution time, and customer retention rates.
• Analyze customer feedback and complaints to identify trends and areas for improvement.
• Review customer testimonials and positive feedback to gauge improvements in customer satisfaction.

Embrace management by objectives for effective goal achievement

By setting clear objectives, creating actionable plans, and regularly monitoring progress, MBO provides a structured framework that enhances employee engagement, improves performance, and aligns individual and team efforts with organizational goals.

Mailchimp's data analysis tools can assist in setting measurable objectives and tracking progress toward them. Our customer insight can help businesses align their objectives with customer needs and preferences while our communication tools facilitate collaboration and feedback.