Currently, MBO is one of the methods of evaluating job performance that is being widely applied in many businesses. So What is MBO?? What benefits does MBO bring to businesses? In the following article, CoffeeHR will answer these two issues and provide information to help you know the advantages and disadvantages of applying this governance model.
What is MBO?
The term “MBO” was first used by Peter F. Drucker in his book titled The Practice of Management 1954. MBO is an abbreviation for the English phrase "Management by Objectives, translated into Vietnamese means Governance by goal. This is a strategic approach to improve the performance of a business or organization.
MBO operates according to a unified process as follows: first it is necessary to determine what the goals that the top managers need to achieve, secondly to define the goals of the lower level department, in a shorter period of time. The management of the entire work is based on the MBO's measurement of the goals of each department, as well as the work plans that have been set out to achieve that goal.
MBO (Management by Objectives) is considered as a method that managers use to approach and carry out their planning work. Since then, many programs have been formed and developed with similar themes, which are widely spread with many different names such as: Goals Management, Goals and controls. , Control and work planning (Work planning and review), Management by results (Management by Results), ... and many other names. Although MBO appears under many different names, in general, the content construction as well as the topic of this method have the same essence and taste.
With great contributions and many benefits in management, MBO helping businesses realize their operational management more easily.
This is proven when MBO is one of the governance models applied by many businesses, organizations and individuals in their management.
In today's management practice, MBO (Governance by objectives) includes 4 basic elements as follows:
- The commitment of members of the organization's senior management board, as determined by the MBO . system
- The consensus and cooperation of members in the organization towards a common goal
- The volunteering, self-discipline and self-governing spirit of the members of the organization to implement the general plan set out by the enterprise.
- Responsible for organizing, controlling and periodically evaluating the work plan of each department
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Illustrated example of MBO
To help you better understand What is MBO?, below are some practical examples that directors, department heads or human resources can refer to.
Example of MBO for Business
- Market and industry leader
- Increase 95% customer retention rate
- Brand awareness rate increased by 25%
- Profit per month is 500,000$
- In 1.5 years payback for new products
Example of MBO for Marketing department
- The number of potential customers is 1000 people/month
- 40% total revenue brought by Marketing department
- Website traffic doubled
- Landing page conversion rate increased by 30%
- Brand awareness increased by 25%
Example of MBO for Sales department
- Reaching the target of 50 new registered customers
- Average transaction reaches 150,000$/month
- Sales cycle reduced to 3 months
- Contract signing rate increased by 20%
Example of MBO for HR
- Employee satisfaction rate maintained at 85%
- HR engagement increased to 85%
- Bonus salary should be maintained 10% higher than the market average
- Identify recruitment requirements for the sales department
- Department ROI increased by 5%
- Organize 2 company-wide events
- Organize a leadership training program
- 15% New candidates come from the introduction of personnel in the organization
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Documentation on MBO. Source: Educationleaves
5 Benefits of applying MBO
The application MBO . method bring many benefits to businesses.
Planning is promoted
Apply MBO . method help managers plan, accurately determine the goals to be achieved and develop in the right direction to bring high results for the business. At the same time, management by objectives also motivates managers to care about results rather than how the work will be done.
Enhance cooperation and consensus
MBO (Governance by Objectives) helps businesses clarify how they navigate their goals from individual to shared goals. To be able to effectively build and define goals, each individual must clearly realize his or her role and responsibility in the organization. From there, businesses can easily link other parts of the organization to improve collaboration between departments and individuals in the operating apparatus of the enterprise.
Motivation and commitment for employees
Enterprises need the participation of all personnel in the organization to be able to establish a management direction according to specific goals, as well as evaluate work efficiency. This not only helps managers quickly navigate personal goals toward the overall goals of the organization, but also improves collaboration between other departments in the business. The operating activities in the system also become smoother, making employees satisfied, motivated to work and loyal to the business, bringing many different success values.
Fairness in assessment and inspection
Management process by goal MBO helps businesses easily evaluate and verify the roles of each individual based on the orientation of work results. Through the MBO . method, the evaluation of employees in the enterprise also becomes easier, because all evaluations are based on actual and objective results. In addition, MBO helps managers to realize the clearest reality about the operating structure of their apparatus.
HR Development
Management of MBO will promote the development and self-learning process for both management and employees. In the process of applying this method, managers will learn a lot of experience, as well as innovate in thinking. From there, their operating ability will be enhanced and improved.
6 steps of the management process according to the MBO . model
Management Process by Objectives MBO is a basic process consisting of 6 steps:
- Step 1: Define your business goals
- Step 2: Determine the employee's goals
- Step 3: Check progress and effectiveness
- Step 4: Evaluate effectiveness
- Step 5: Feedback often
- Step 6: Recognition of results and achievements
Step 1: Define your business goals
In an organization, in addition to long-term goals such as vision, mission, development strategy, etc., all the goals set by the supervisor are only temporary. Because it is based on observation and evaluation of what the company can and should achieve in a certain time.
Step 2: Determine the employee's goals
After communicating the overall plans, strategies & goals that need to be directed to all employees in the organization, managers can start working with subordinates to develop goals for each individual position. core. This is seen as a conversation, sharing about what they can do in a specific amount of time with available resources. At the same time, it is possible to give suggestions on feasible goals for the department or organization.
Step 3: Check progress and effectiveness
To be able to realize the overall development goals of the organization, each individual must do well at the work he or she is assigned. That's why it's so important to keep a close eye on your employees' progress, performance, and progress.
Managers can refer to task management tools such as: support for making work lists, criteria and target evaluation scores, etc. to be able to monitor in detail the performance and progress of each individual. Job goals associated with each employee.
Step 4: Evaluate effectiveness
Within the framework of MBO . management method, the performance evaluation will be carried out regularly with the participation of relevant management levels.
Step 5: Feedback often
In the management approach to goals, continuous feedback on results and goals is the most important step, because it helps employees see their strengths and weaknesses so that they can adjust their work plan. accordingly.
Periodic evaluation meetings are opened to supplement information from the feedback, in which superiors and subordinates discuss progress and problems in the process of achieving goals. From there, businesses will have many suggestions in the way of implementation.
Step 6: Recognition of results and achievements
This is the final step to evaluate and recognize the success of employees in the organization. In this step, in addition to recognizing and evaluating work results, managers need to have policies and activities to reward employees who achieve the set goals, in order to encourage, motivate and motivate employees. spirit of implementing MBO.
Advantages and disadvantages of management by objectives
Any method has its strengths and limitations. However, MBO . method (Governance by Objectives) is highly appreciated because it receives great satisfaction from many business owners.
Advantages of MBO
- MBO upholds the roles and responsibilities of each employee at work.
- Depending on the education, experience and professional skills to determine the specific core goals for each employee.
- Improve communication and interaction skills between departments and individuals for better teamwork.
- It is necessary to show employees the company's expectations for them & how they influence them towards the overall goals of the business.
- Each employee undertakes its own set of goals. From there, they can see their importance in the organization, promoting dedication and loyalty.
- Employee and organizational goals are closely related.
Disadvantages of MBO
- MBOs often ignore the existing characteristics and working conditions of the organization.
- Employees are always put under pressure to accomplish goals but forget to use MBO to participate, willingly contribute and develop management capacity.
- Employees sometimes feel pressured by the organization's high expectations and requirements compared to existing capacity & resources.
- To start implementing MBO, it takes a very long time, sometimes it takes 3-5 years to be able to apply the MBO method properly and fully.
- Finally, many managers tend to think that after setting up the MBO, this overall system can handle all the management issues in the business. However, negative effects can occur if over-reliance on this method.
See also: Learn more about what the MBO method is
END
Above are some sharing about MBO. CoffeeHR hopes that through this article you can know more about the definition What is MBO?, as well as issues related to MBO such as the benefits, pros and cons of this approach to run the business more efficiently.
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