Management by Objectives

Management by objectives is defined as the business strategy in which all the employees and managers of a company work in order to achieve the objectives that have previously been proposed.

Management by Objectives

Generally, it is known by the acronym APO (management by objectives). It is a tool used to measure the performance of employees and the level of productivity of the company. This is done based on the objectives that have been established at the beginning of the planning.

In reality, it arises against the practices that sought to improve productivity, through the application of pressure management. The pressure system was based mainly on the control and monitoring of the employees’ tasks. With this practice, good results were not obtained, so it ended up being ineffective.

Of course, management by objectives became popular with Peter Drucker in his work The Practice of Management in 1954. It is a very effective tool because it begins with the establishment of goals and objectives and ends with the evaluation of performance.

In addition, management by objectives seeks to take advantage of the skills that employees have and motivate them to achieve the proposed objectives. Since, if the objectives are reached, the employees can obtain some recognition.

Phases of administration by objectives

Management by objectives follows the following phases:

1. Definition of the organization’s objectives

First, the organizational goals are established. This point is very important because they define the actions that companies have to follow to achieve the effectiveness of their work. The objectives must be managed in an appropriate way, so that they are reached in the determined times.

2. Definition of labor objectives

Second, organizational objectives are communicated by management to all employees in the organization. The director or superior must communicate not only the general objectives of the organization, but also the entire plan of action, strategies and the way of proceeding that must be followed at work.

In other words, it defines what each worker has to do to achieve the fulfillment of the objectives. This is decisive to achieve the expected results. In this phase, each worker draws up a list of objectives in which their tasks and obligations will be reflected.

Of course, the work objectives are supervised and approved by the superior. In order to engage superiors and subordinate employees. The established commitment is essential for the achievement of results.

3. Track performance and progress

Third, performance and progress must be monitored. As this ensures that the management by objectives process is effective.

In this phase it is required:

  • Prepare short and long term plans and objectives.
  • Implementation of controls that are effective.
  • Design a clear organizational structure where the levels of authority and the assignment of responsibilities are defined. So that this helps decision making.
  • Identify what is useless and counterproductive to performance and achievement of objectives.
  • Use of common terms and concepts related to management by objectives. This will aid in the more objective measurement of the performance and progress of the plans.

Obviously, the performance review and measurements must be clear, explicit, simple and reliable for both the employees involved and the supervisors. Since they can even serve to modify the objectives and actions that are taken.

Additionally, employee performance appraisals should be done periodically and late in the process. All this to verify the fulfillment of the objectives.

4. Feedback

Finally, a continuous feedback process must be carried out, on the measurement of performance and the goals achieved. This in order that all the people involved know their progress and can take corrective measures on their own performance.

It is also important to have regular meetings with superiors and subordinate employees. In these periodic meetings it will be possible to assess and review the degree of progress achieved in achieving the results.

Management by Objectives
Management by Objectives

Advantages of management by objectives

The main advantages of the application of management by objectives are:

  • Ensures employee engagement.
  • It improves the administrative process because it forces managers to plan, organize, control and provide feedback throughout the process.
  • Each worker knows exactly what is the role and task that must be performed within the organization. Since they work with specific objectives.
Management By Objectives Advantages
Management by Objectives

Disadvantages of management by objectives

Among the main disadvantages we can mention:

  • Difficulty transmitting and teaching the philosophy of management by objectives.
  • Weaknesses in providing the standards, especially to the people who must set the goals.
  • Limitations when determining the objectives for the short and long term.

By way of conclusion, it can be said that management by objectives starts from the establishment of general objectives. These are simplified and become specific so that each department of the company or even each person, knows precisely what they have to do to achieve the results. Reason why managers and employees should participate in its definition. Once defined, progress should be reviewed periodically and rewards offered for achieving results. Everyone works motivated and is clear about what they must do to achieve the goals.