by 
►This concept was first given by Alfrad Slown in 1950 but Peter Drucker popularized it in 1954 in his book ‘The Practice of Management’.
►This approach is also known as management by result, goal management, performance management and accountability management.
►It is a system of management where (i) goals for the business as a whole are set and (ii) managers and staff members at every organizational level are actively involved in goal setting.
►The idea is that when employees are involved in goal setting for them, they will put their heart to achieve them.
Definitions:
1.Peter Drucker:- business performance requires that each job be directed towards the objective of the whole business.
2.George Odiorne:- it is a process whereby the superior and subordinate managers of an organization jointly identify its common goals, define each individual’s major areas of responsibility in terms of results expected from him and use these measures as guides for operating the unit and assessing the contribution of each of its members.
3.W.J. Reddin:- it is the establishment of objective areas and effectiveness standards for management positions and the periodic conversions of these into measurable time bound objectives linked vertically and horizontally with future planning.
4.S.K. Chakravarty:- it is a result oriented, non-specialist, operational managerial process for the effective utilization of the material, physical and human resources of the organization, by integrating the individual with the organization and the organization with the environment.
Nature (Characteristics) of MBO:-
1.It is a system approach integrating all employees for goal setting and achievement.
2.It is a behaviorist approach where human element is recognized at each level.
3.It is democratic approach because it is participative.
4.It measures results with the standard prescribed and suggests corrective measures.
5.It focus on goals of the individual and the organisation.
6.It has autonomous control because employees are not controlled from outside but they themselves evaluate their performance in terms of predetermined goals and devise corrective measures if their performance is below the norms.
7.It boosts up employee’s morale and motivation because they are called for participation.
Process (steps) of MBO:-
1.Set objectives of the organisation
2.Set objectives of the departments
3.Set objectives of the individual
4.Develop action plans implement plans
5.Take periodic reviews
6.Appraise results
7.Take corrective action for improvement.
Advantages of MBO:-
1.Better management
2.Clarifies organization
3.Harmony of objectives
4.Motivation
5.Evaluation of results
6.Development of managers
7.Improvement in superior-subordinate relations.
Scope (limitations) of MBO:-
1.Difficulty of introducing for reaching changes
2.Difficulty in setting goals
3.Too much emphasis on results
4.Pressure on employees
5.Too high expectations
6.Neglect of some important goals
7.Not useful for all
8.Rigidity.
Requisites (preconditions) of MBO:-
1.Setting real objectives
2.Ends- means distinction
3.Clarity of objectives
4.Active supports from all participants
5.Active supports from top management
6.Three elements that objectives should be-helpful in evaluating performance, measurable and convertible into targets.
7.Multiple objectives and sub-optimization
8.Displacement of objectives
9.Quantitative cum qualitative objectives
10.The ‘why’ spirit (why can not be obtained ?)
11.Individual growth
12.Study of environment and flexibility
13.Provision of performance
