18 Examples of Management By Objectives

John Spacey, updated on July 18, 2023

Management by objectives, or MBO, is a performance management technique centered around participative goal setting. Goals are agreed between each individual in a team and the team manager. Each individual's performance is then evaluated using the same goals at the end of a performance period. The following are basic examples of the process.

Organizational Goals

Strategy and goals are set at the top level of an organization.

Goal Cascade

Organizational goals are translated into department goals that are translated into team goals.

Goal Setting

Individual goals are set by employees working with their manager. These are designed to align to team goals.

SMART Objectives

Goals are designed to be specific, measurable, achievable, relevant and time-bound or SMART.

Goal Approval

Both the employee and their manager sign-off on performance goals.

Goal Achievement

Employees work toward their goals by participating in projects, managing relationships with stakeholders, completing daily work and delivering action items.

Feedback

Managers provide regular feedback and immediately manage low performance.

Goal Adjustments

Priorities change and new objectives constantly arise. It is an employee’s best interests to get these changes documented in their objectives.

Performance Self-Evaluation

Employees self-evaluate their performance at the end of a performance period.

Stakeholder & Peer Feedback

Employees may collect stakeholder and peer feedback to include in their evaluation.

Manager Evaluation

Managers evaluate each of their direct reports.

Performance Review

Employees explain their self-assessment and managers explain their assessment of the employee.

Final Assessment

Comments are added to the assessment from both the manager and employee. This gives an employee a chance to respond in writing to the manager’s assessment.

Sign-off

The final assessment is signed by the manager and employee.

Document Retention

The employee, manager and human resources retain a copy of the performance review.

Performance Improvement Plan

Where performance is low managers develop a performance improvement plan for an employee. Failure to improve may result in disciplinary actions or termination of employment.

Performance Incentives

Performance feeds into performance incentives such as an annual bonus.

Promotions, Recognition & Awards

Performance feeds into consideration for promotions, recognition and awards.

Alignment

Where management by objectives is adopted by an organization there is an effort to align the goals from executive management to middle management and from middle management to teams. As such, it is considered a tool of strategy implementation. Management by objectives is also considered a communication and performance management tool that sets expectations in a participative and formal way.