What is MBO? Characteristics and process of management by objectives MBO

MBO is a familiar term used by businesses to define and pursue goals. So, what exactly is management by objectives (MBO) ? How to implement MBO effectively? Let's find the answer with 1C Vietnam in the article below!

1. What is MBO?

MBO (short for Management by Objectives), also known as management by objectives, is a strategic approach with the aim of improving the performance of businesses. With this management method, managers and employees will set, discuss and monitor the results of the implementation of the business's goals within a certain period of time.

Typically, management by objectives (MBO) consists of four main elements:

• Managerial commitment to the MBO system.
• Cooperation of members in building common goals.
• Self-awareness and self-management of each individual.
• Control work progress.

2. Example of management by objectives MBO

In addition to providing information about what MBO is, 1C Vietnam will send managers some typical examples of successfully applying the MBO management method to their business operations.

Examples of MBO Management for Businesses

• Help businesses capture the market.
• Increase customer retention rate by 92.5%.
• Increase brand awareness by 30%.
• Achieve profit of 500,0000$/month.
• Payback after 2 years for new products/services.

Example of MBO management for Marketing department

• Attract and retain 1000 – 1500 potential customers per month.
• Marketing strategy brings in 35% of total revenue.
• Double your website traffic.
• Increase landing page conversion rates by 30%.
• Increase brand awareness by up to 30%.

Example of MBO management for sales department

• Complete the goal of 50 new customer registrations this month.
• Average monthly transactions reached 150,000.
• Sales cycle reduced to 3 months.
• Contract signing rate reached 20%.

Example of MBO management for HR

• Ensure employee satisfaction level is 80%.
• Increase employee engagement by 85%.
• Maintain compensation 10% above average.
• Coordinate with sales department to determine sales recruitment requirements.
• Organize 2-3 programs for businesses.
• Implement leadership training program.

In general, most departments in a business can apply the MBO management method. Although the operational goals are independent, they are quite closely related to each other.

3. What are the benefits of the MBO method?

The MBO method is a tool that helps managers define goals, improve performance and evaluate work effectively. To better understand what the MBO management method is, let's learn with 1C Vietnam about the 5 benefits that this method brings:

3.1 Improve performance

MBO is a measurable and achievable method, suitable for time and any business strategy. Through that, MBO helps employees clearly understand the goals to be achieved and focus their efforts on the most important things, thereby increasing business efficiency.

3.2 Promote employee engagement

The MBO method helps businesses encourage employees to participate in the planning and goal achievement process. At the same time, it helps employees to be aware of their responsibilities, stay committed to their jobs for a long time, and be more motivated to achieve their goals.

3.3 Enhance cooperation capabilities

MBO requires management and employees to jointly outline common goals. Through this, everyone in the business will have a clearer understanding of the goals and their role in achieving those goals.

In addition, the MBO management method also requires periodic exchange and discussion of goals and action plans, thereby enhancing the information exchange process between departments and divisions in the organization.

3.4 Ensure clarity and transparency

The MBO method will ensure that all employees clearly understand the company's goals, helping to increase focus and efficiency in achieving goals. In addition, this method also helps businesses to monitor performance, ensure work quality and conduct transparent and fair evaluations.

3.5 Evaluate work based on the principle of equality

In addition to the above benefits, the MBO management method also helps businesses identify and evaluate project results based on the principles of equality. Thanks to that, the evaluation process will ensure objectivity, not affected by emotional factors. The MBO management method helps businesses have a realistic, comprehensive view of the effectiveness of operations and creates conditions for conducting evaluations among employees.

4. MBO implementation process in business

The MBO management method is implemented according to a systematic process consisting of 6 steps. Each step will have specific characteristics and requirements as follows:

4.1 Step 1: Identify common goals

MBO sets goals based on overall objectives. Then, departments and employees will use those goals to set sub-goals, contributing to the development of the main goals of the business.

4.2 Step 2: Identify personal goals

Goal setting is the effective stage of MBO. Managers can work with subordinates to develop specific, measurable, and challenging individual goals.

In particular, measurement methods such as OKR and KPI are used by many businesses to evaluate the level of completion and guide the implementation of human resource goals. To perform well in determining sub-goals, managers need to analyze the work, authority, and functions of each department, and grasp the number of employees in the department to help managers allocate appropriate work.

4.3 Step 3: Manage work progress

Using alternate management tools is the solution to help businesses set up work lists, manage progress and evaluate results. The MBO goal management model often includes monitoring activities such as: Evaluating results, providing feedback and adjusting plans in the short term.

4.4 Step 4: Evaluate target management performance

MBO helps businesses periodically evaluate management activities, ensuring full participation of all relevant management levels. The performance evaluation process needs to be carried out transparently based on the MBO process. At the same time, businesses need to have measures to motivate employees to promote passion and set higher requirements for the set goals. Specifically as follows:

• MBO identifies criteria for evaluating employee performance.
• Businesses review work performance methods to evaluate work progress and ensure work is performed according to MBO procedures.
• Compare actual results against the goals set during the implementation of the MBO plan.
• Identify and classify the difficulties and barriers that businesses encounter in the process of performing their work.
• Through the evaluation results, MBO will provide feedback to employees to adjust plans and goals for the next period.

4.5 Step 5: Provide comments and suggest changes for improvement

Managers need to regularly monitor and update employees' work progress to promptly detect problems and propose appropriate solutions. Feedback should be constructive and timely, giving employees time to adjust their plans, understand their strengths and weaknesses, and have more motivation to develop.

4.6 Step 6: Record achievements

With the final stage of recognizing the achievements of employees in the enterprise, applying MBO helps managers build policies and reward activities to encourage and promote the spirit of completing business goals.

5. Advantages and disadvantages of MBO for businesses

Below are some advantages and disadvantages of MBO management method for businesses:

5.1 Advantages

Some outstanding advantages of the management by objectives (MBO) method can be mentioned as:

• Support businesses in managing goals, promoting the roles and responsibilities of employees at work.
• Identify core goals for each employee based on level, experience, education and expertise.
• Improve communication and connection skills between members to achieve good team performance.
• Help employees understand the company's expectations of them and their impact on achieving the company's overall goals.
• Affirm the importance of each employee in the organization, promote loyalty and dedication.
• Employee goals are closely linked to the overall goals of the business.

5.2 Disadvantages

Besides its outstanding strengths, the MBO management method still has many disadvantages below:

• Because it focuses so much on goals, MBO often ignores the context and working conditions of the business.
• Managers always put pressure on employees to achieve their goals, forgetting that the main role of MBO is to contribute and develop management skills.
• Employees will face a lot of pressure due to high demands from the business.
• The time to apply the MBO method is very long, it takes 3 - 5 years to implement properly and fully.
• Many managers misunderstand MBO, seeing it as a system that can solve all management problems in the business, which leads to unwanted negative impacts.

6. Manage target indicators effectively with 1C:ERP solution

1C:ERP is a comprehensive solution that helps businesses plan resources and develop optimally based on customer experiences. If a business is looking for a management solution with a modern and effective technology platform, 1C:ERP is the perfect choice, helping businesses increase their competitive advantage and overcome challenges in mastering technology.

So what are the strengths that this management solution brings?

• The system has open logic, helping businesses master software solutions, minimizing dependence on suppliers.
• Easily customize specific requirements within the 1C and third-party solution ecosystem.
• Including Vietnamese Accounting Standards (VAS) and International Accounting Standards (IFRS), ready to prepare consolidated and joint reports for all business models.
• Compatible with all platforms, leveraging existing platforms and popular browsers.
• Provide full support to help businesses apply in-depth into commercial and production operations models.

Some benefits of applying 1C:ERP:

• Improve business workflow: 1C:ERP helps businesses manage and connect departments and personnel within the business. This makes it easy to eliminate duplicate work or manual operations.
• Ensure performance: Use the target metrics dashboard, which allows businesses to analyze target metrics and drivers in a summarized, detailed, and visual format.
• Real-time reporting system: 1C:ERP solution allows managers to define target indicators and collect real-time reports. At the same time, it helps managers to access the system to make timely decisions.
• Improve product quality: 1C:ERP provides inventory control, shipping policies, and customer feedback capabilities so businesses can detect errors and correct them promptly.
• Reporting: The solution provides reports to management and employees with real data, helping them make effective operational decisions.
• Ensuring commitment, enhancing security: 1C:ERP's information encryption and authorization capabilities help businesses manage information and record data version changes, ensuring transparency of information and user access history.
• Improve investment efficiency: 1C:ERP solution helps businesses optimize operating costs, control operational goals and employee performance to achieve financial goals.

Thus, the above article has mentioned what MBO is , the characteristics and the role that this management method brings to businesses, especially in the period of digital technology transformation. Hopefully, with the above sharing, businesses have clearly understood the importance of target management and collected information to effectively manage target indicators. If your business needs advice on 1C:ERP solutions, support for effective target indicator management, please contact 1C Vietnam via Hotline: 0247.108.8887, the consulting team will promptly answer!