Management by Objectives (MbO)

Management by Objectives (MbO) is a form of transactional leadership. Employees can actively participate in setting goals.

Definition / explanation

Management by Objectives was developed in 1954 by Peter Ferdinand Drucker. Employees take an active part in the target setting and can then decide freely within the framework of these agreed targets. Performance standards and control data are set during the goal-setting discussion between the supervisor and the employees. The employees themselves determine the measures required to achieve the agreed goals. Management by Objectives is therefore results-oriented.

Objectives of management by objectives

The aim is to implement the strategic goals by jointly defining the goals for the employees and for each organizational unit.
The goals should be as follows:

S. = specific
M. = measurable
A. = can be actively influenced
R. = realistic
T = terminated

The corporate goals result from the sum of these individual goals. Employees align their work with the goals and the superiors assess the performance of these employees and review the achievement of the agreed goals.


  • Understanding management by objectives as a management task
  • existing goals
  • clear understanding of what management by objectives means
  • Alignment of the individual goals of the employees with the strategic goals of the entire organization
  • well-functioning communication and information system
  • realistic goals

advantages and disadvantages


  • more co-determination rights and freedom of action for employees
  • Inclusion of personal ideas, goals and wishes of the employees
  • Linking the company's goals with individual goals
  • stronger loyalty of employees to the company
  • Team spirit and motivation are encouraged
  • Remuneration through, for example, bonuses
  • Personal responsibility to achieve the goal
  • Managers are relieved


  • Control of employees necessary
  • higher pressure to perform on employees and increased expenditure of time
  • lack of financial incentive leads to the failure of the employee to behave in a desirable manner
  • Employees only have the achievement of goals in mind
  • Risk that there will be more quantity than quality


  • Management by Objectives (MbO) is a transactional leadership style
  • Managers and employees agree on the goals together
  • Establishing performance standards and control data
  • Freedom of choice among employees
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Synonym for / Other word for

  • management by objectives

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