The concept of “Management By Objectives’ (MBO) was first given by Peter Drucker in 1954 (The Practice of Management). It can be defined as a process whereby the employees and the superiors come together to identify common goals, the employees set their goals to be achieved, the standards to be taken as the criteria for measurement of their performance and contribution and deciding the course of action to be followed.
The essence of MBO is participative goal setting, choosing the course of actions and decision making. An important part of the MBO is the measurement and the comparison of the employee’s actual performance with the standards set. Koontz and others have defined MBO as follows:
“MBO is a comprehensive managerial system that integrates many key managerial activities in a systematic manlier, consciously directed towards the effective and efficient achievement of organizational objectives.“
