Definition: MBO is a management practice which aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization.

Description: MBO requires all levels of management to agree on clearly defined quantitative and/or qualitative objectives. These targets then need to be periodically reviewed by higher levels of management.

In other words, MBO involves focusing more on results rather than the activities involved. The top management is essentially negotiating a contract of goals with their subordinates without dictating a detailed roadmap for implementation.

The MBO method is supposed to enhance organizational effectiveness by getting the organization to become more result focused. It is also supposed to encourage independence and entrepreneurism amongst line managers. This philosophy originated sometime in the early 1970s.

Also See: 360-Degree Feedback, Competency Mapping, Conflict Management, Employee Stock Option Plan (ESOP), Job Description, MBWA, Mentoring, Pink Slip, VRS