Management by objectives is a business model that encourages a team collaboration committed to achieving a company's mission. Each management level identifies a target purpose, which is agreed upon by organizational consensus. This management style was first introduced in Peter Druck's 1954 book, "The Practice of Management."
The idea of management by objectives was further developed by George Odiorne, Drucker's student. Objectives are communicated to employees, who set individual performance goals that support the organizational objectives. Performance is monitored and evaluated and is focused on a future outcome basis.
According to Druck's plan, management by objectives should be "specific, measurable, achievable, realistic and time bound." Compliance with this "SMART" method allows a manager to stay focused, rather than caught up in distracting day-to-day activities that require attention.
The advantages of an management by objectives business model include a closer working relationship between managers and employees, and individual departments are able to determine marketing and financial decisions. Employees are self-motivated to perform well and enjoy greater job satisfaction. Better communication and coordination exists within the organization.
There are also disadvantages to the management by objectives model. Set objectives hinder innovation, and they are time-consuming to create and challenging to maintain. Although collaboration is intended to be the key to success, the desire to help colleagues may suffer when individual goals are the entire focus of a department.