Management by objectives (MBO), also known as results-based management was made popular by Peter Drucker in 1954 from his book entitled The Practice of Management. In a nutshell, this style of management focuses on the outcomes and not on the processes. If perfect attendance was valued in other management styles, this is not the case with MBO.
With more and more employees being outsourced or telecommuting, measuring hours is no longer an effective way to assess their performance since they are not around for their supervisor to keep tabs on. Results-based management is one of the better ways to manage remote employees so you can make sure that they are accomplishing their desired tasks and delivering them within the set deadline. Aside from this benefit, using MBO can do a lot more for a business. Here are some more things it can do.
- By utilizing MBO, you get a better understanding of what you are truly trying to achieve. Your goals become much clearer to you since you focus on what needs to happen first, and how it will get there second. After all, there is no point in figuring out ways to accomplish something if you have no idea what you are trying to accomplish. When you know what your bottom line is, you can carry on accordingly.
- MBO allows you to allocate your resources properly. Once you know what you want to achieve, you can concentrate the resources you have to the aspects of the business that really need them. From manpower to business phone systems, you will know what is truly needed —and unnecessary for that matter, enabling you to weed out excess expenses.
- Employees will feel engaged, motivated, and are more likely to stay loyal to the company. With MBO, they are going to know exactly what they are contributing to help the business attain its goals, making them feel much more valuable. This compels them to perform better and in turn, get better results. There will be decreased feelings of working towards nothing. Also, they will have higher levels of autonomy since it is less important where and when they work for as long as they get the job done on time. This allows them to plan their own schedules and work when they feel at their best.
- Underperformers are easily spotted when you use MBO. Since it is results-based, you will easily see when employees are not producing any output. Once you find these weak links, you can do what you feel is best for the company in terms of its performance and efficiency.
- MBO levels the playing field for career advancement. While it really is not ideal to promote employees based on their political skills at work, it still happens. With results-based management, the basis for advancement comes from output and actual performance.
- Results-based management can increase profit. By having a projected figure in terms of profit, you can work your way down. While it is much more customary to think of revenue as a final point, using profit can make your employees know how much really needs to get done to hit that profit margin. By taking overhead and operating costs into account, you really know how much more is needed to hit your targets, removing any false hope from seeing revenue, only to get let down when expenses are computed.