The management by objectives (MBO) method is a process in which managers and employees jointly set objectives for the employees, periodically evaluate performance, and reward employees according to the results. Although there is a three-step process, there is no standard form used with MBO, so it is a method. MBO is also referred to as work planning and review, goals management, goals and controls, and management by results.
As with the use of critical incidents, employees get ongoing feedback on how they are doing, usually at meetings scheduled at regular intervals. We can use the MBO method successfully with our employees if we commit to the process and truly involve employees rather than trying to make them believe that our objectives are theirs.
On an organization-wide basis, MBO is not too commonly used as the sole assessment method. It is more commonly used based on the evaluative assessment during the development part of the performance appraisal. One difficult part of MBO is that different employees will have varying individual goals, making MBO more difficult and time-consuming than using a standard assessment form.
Employees who do not meet their goals, so long as the reason is not out of their control, usually have rewards withheld and even punishment given when necessary.
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