Management by Objectives - Communication Theory: A Phenomenon in Management, Supervisor, and Employee Objectives

Management by Objectives - Communication Theory: A Phenomenon in Management, Supervisor, and Employee Objectives

Management by Objectives (MBO) is a resource tool focusing on manager-employee motivation, strategic planning, and a process for a manager-employee agreement on performance goals and performance enhancement.  Managers develop objectives focused on the future to cope with  quick social and technological change.  Together employees and managers generate goals for their jobs (Hindle, 2008).  The plan agreed upon must be clear and achievable so they can create an evaluation criterion of objectives and a time frame.  For example, a customer services representative in a call center will set a target date to increase customer orders by 25 percent within a year to increase sales (Hillstrom & Hillstrom, 2002, p. 707).  Management-by-Objectives is designed to enhance two-way communication with the administration and employees to focus on employee goals and objectives, not the activities the employees achieve on the job, which is a major factor for employees’ job performance and satisfaction (Hillstrom, & Hillstrom, 2002, p. 707). 

The MBO management philosophy is accepted by most organizations in the last 50 years because goals and objective setting, are relevant to employee commitment and job performance, as well as meeting organizational objectives (Levinson, 2003).  The management philosophy of MBO relates specifically to linkage of personal job targets to company performance measures in top management, middle management, and lower level management (Levinson, 2003).  The purpose of MBO activities is to shift the employee's focus to goals.  Drucker, who was called "the guru of management" and promoted MBO, called on management to focus on accountability for results, not on the activity of doing the job.  Frequently managers miss their objectives because of “the activity trap,” when current activities overshadow their original purpose (Hindle, 2008).  The crucial aspect of a job is employee job performance and the organization’s return on investment (ROI).  A sophisticated feature of MBO is restraint or self-control; employees are self-directed by individual performance objectives, not just instructed what to do by management (Tosi, Rizzo, & Carroll, 1970). 

 As a concept, MBO emphasizes the future, is optimistic about it, and develops managers with optimistic viewpoints, who can readily cope with change.  It is a comprehensive technique, not only useful in industrial organizations, but also in public institutions.  Management-by-Objectives provides relevancy for a manager, supervisor, and an employee as they work together to establish and align individual goals and actionable objectives with organizational goals.  The key advantage for managers using MBO is that they can appraise employee performance, whether objectives are meaningful, and verify when they are achieved (Koontz, 1977).  Drucker (1954) proposed MBO as a management-employee tool and not a theory.  The focus is on how to motivate manager-employee relationship, to set goals for individuals and the company.  These objectives are filtered down to each management level.  Previously, MBO functioned at the management level.  In transition, from the manager to employee level, the team or group level is useful (Antoni, 2005).  

Managers using MBO may organize process-oriented teams to measure goals attained at that level.  Managers must be able to lead teams if necessary, to complete the objectives, allow for feedback and to support performance goals.  The team’s shared purpose is to collectively regulate their action to be able to use the targets and systems (Antoni, 2005).  The MBO systems work efficiently at the group level for establishing teams as a goal-setting technique for management.  Fulk, Bell, and Bodie (2011) recommended the administration should have meaningful conversations with their staff and determine challenging, yet attainable, individual goals for the use of the MBO employee professional development.  The team members must be presented with opportunities, evaluation, and feedback to meet their aim (Fulk et al., 2011).  Therefore, the concept of MBO gives accurate representation so a person can accomplish exponential growth.  Goal-setting theory and research as an explanatory basis improve performance and job satisfaction when rewarding performance.  Most goal-setting researchers have analyzed individual goal setting on existing studies.  However, at a group level more research is necessary for the MBO literature (Antoni, 2005; Fulk, Bell, & Bodie, 2011).

Alfred P. Sloan author of the influential My Years with General Motors was first to coin the term MBO in 1950 (Hindle, 2008).  People give credit to Peter Drucker’s book, The Practice of Management, published in 1954, and to his student, George S. Odiorne ‘s 1965 Management by Objectives (Odiorne, 1965).  Interest in MBO was revived when one of the founders of the Hewlett-Packard (HP) computer company, Bill Packard, said that MBO was an essential part of The HP Way.  Hewlett-Packard’s long range and idealistic goal was to grow the company by earning customer loyalty.  Hewlett-Packard management developed a list of targets and integrated them with the entire workforce.  Managers aligned their aims and objectives with the company, and collaborated with employees to produce written plans to achieve those goals.  They did it right, according to Packard, because they believed CEOs and managers should care about the company and the employees, not just the shareholders (Hindle, 2008). 

Bryan and Locke (1967) believed an essential feature of MBO approach is supervisor and employee objectives.  Management-by-Objectives is an approach to improve manager-employee communications, relate employee performance to organizational goals, and performance appraisal that attempts to clarify employee role requirements.  Involving employees and incorporating their goals is a priority for motivation, satisfaction and overall success (Levinson, 2003; Wegge, 2009).  Management-by-Objectives moves managing from being random, even haphazard, to providing managers verifiable actions to track progress toward achieving future goals (Koontz, 1977).  From my perspective, for the thoughtful manager or supervisor of a perceived successful team, MBO looks like a practical management philosophy and communication theory that appears equally complete and personalized for both managers, employees, and businesses. 

Discussion Questions

How can you use Management-by-Objectives (MBO in your workplace? If not, why?

Does the management philosophy appear outdated or up-to-date for the 21st century? Why?

Why did management so readily accept this philosophy?


Antoni, C. (2005). Management by objectives-an effective tool for teamwork? International Journal of Human Resource Management, 16(2), 174-184. doi:10.1080/0958519042000311381

Bryan, J. F., & Locke, E. A. (1967). Goal setting as a means of increasing motivation. Journal of Applied Psychology, 51(3), 274-277. doi:10.1037/h0024566

Drucker, P. (1954). The practice of management. New York, NY: Harper & Row.

Fulk, H. K., Bell, R. L., & Bodie, N. (2011). Team management by objectives: Enhancing developing teams’ performance. Journal of Management Policy and Practice, 12(3), 17-26. Retrieved from

Graham, G. (1968). Correlates of perceived importance of organizational objectives. The Academy of Management Journal, 11(3), 291-300. Retrieved from

               Hillstrom, L. C., & Hillstrom, K. (2002). Management-by-objectives. In L. C. Hillstrom, & K. Hillstrom (Eds.), Encyclopedia of small business (2nd ed., Vol 2, pp.                707-709). Detroit, MI: Gale Group.

Hindle, R. (2008). The Economist guide to management ideas and gurus. London, UK: Profile Books Ltd.

Koontz, H. (1977). Making mbo effective. California Management Review (Pre-1986), 20(000001), 5. Retrieved from

 Levinson, H. (2003). Management by whose objectives? Harvard Business Review, (January), 107-116. (Reprinted from Harvard Business Review, July-August 1970, pp. 125-134). Retrieved from

Litterer, J. A. (1965). The analysis of organizations. New York, NY: John Wiley & Son.

Odiorne, G. S. (1965). Management by objectives: A system of managerial leadership. New York, NY: Pitman Publishing.

Rodgers R., & Hunter, J. E. (1991). Impact of management by objectives on organizational productivity. Journal of Applied Psychology, 76(2), 322-336. doi:10:1037/0021-901.76.2.322.

Tosi, H. L., Rizzo, J. R., & Carroll, S. J. (1970). Setting goals in management by objectives. California Management Review, 12(4). 70-78. Retrieved from

Wegge, J. (2009). Participation in group goals setting: Some novel findings and comprehensive model as a new ending to an old story. Applied Psychology, 49(3), 498-516. doi:10.1111/1464-0597.00028


Imena R. Johnson's picture Imena R. Johnson | July 8, 2017 2:05 pm MST

Hello Dorothy,

Management-by-Objectives (MBO) is still practiced today, at least at my place of work.  MBO method (my perception) allows an employee to focus on realistic goals and a plan which supports the organizational objectives.  Although MBO practice is a formula to help managers and individuals come up with an array of goals and a blueprint to achieve them, I have observed MBO practice to fail. Why does MBO method fail?  I think MBO fail because of leaders who are neglecting to check-in or follow through with their subordinate after the setting of goals and plan. Also, I have noticed that the lack of motivation from leaders kills the plan to act. In other works, MBO will fail if there is no motivation to support an employee to continue and sustain goal-directed achievement(s).


Dorothy Williams's picture Dorothy Williams | July 10, 2017 7:07 am MST

Thank you Imena for your comments. From my understanding about the implementation of MBO practices, it sometimes takes years to be effective. Many companies tend to raise goals and employees become frustrated if they are too high. And many employees do not want to be held responsible when goals are so-called 'forced' upon them. Those expectations from employees may lead to ill-feelings. These are some of the disadvantages of MBO.

Kimberly Usrey's picture Kimberly Usrey | July 11, 2017 5:23 pm MST


I enjoyed reading the information you provided about Management by Objectives (MBO) and the potential benefits for organizations. I believe when all stakeholders in the organization are committed and motivated for the success of the MBO technique the work environment creates positive collaboration at the individual, group, and organizational level. I believe the use of MBO could benefit the communication among the employees in the workplace and provide agreed upon expectations of employees and upper management. 

Christopher Hicks's picture Christopher Hicks | July 12, 2017 11:27 am MST

Very informative Dorothy!

In the coaching world, we start each session by asking our clients what their goal is for the session. As you mentioned, there is power in collaboration (manager-employee agreement), and setting timeframes. In my opinion, management-by-objectives (MBO) paved the way for organizations to adopt learning and coaching cultures, as well as manager-as-coach leadership styles.

Dorothy, do you think there are any consequences or benefits for the employees (non-manager) of organizations that embrace MBO? 

Simona Parker's picture Simona Parker | July 16, 2017 9:23 am MST

Management by objectives is an ideal plan and can yield a positive outcome.  I believe the theory is beneficial because it means managers would sit with their subordinate employees and provide them with the support needed to function in any position assigned on a personal level.  I also believe the management by objectives would be ideal for organizations that attempt to operate on a lean structure because it is a demonstration that employees can turn to their managers for support if needed.  Based on experience and observation, a supportive relationship between managers and subordinates is the foundation of engaged employees who commit to company goals and objectives with pleasure.  To me, management by objectives is a gesture that managers have care and concern for their employees.  The thought of being able to work with my manager to esablish goals and the best way I can reach them is the best way employers could motivate me to commit to my role in the organization and perform as expected and beyond.  Aside from job training, management by objectives could be a platform for improvement in the workplace: performance, engagement, satisfaction, and more.

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Dorothy Williams



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