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MBO (Management By Objectives)

Last week we had an overview of the most known and used methodologies for Strategy Execution.
We will focus, firstly, on the MBO methodology, which is a 5 steps approach introduced by Peter Drucker in his 1954 book “The Practice of Management”.
The 5 steps are:

1. Set Corporate Objectives: company leaders have to establish overall company objectives. These objectives must stem from the company mission;
2. Set and Align Employee Objectives: company leaders have to translate company objectives into individual employees objectives. These objectives must be SMART (Specific, Measurable, Achievable, Relevant and Time-bound);
3. Monitor Performance: a constant monitoring of company and employees performances is crucial to mitigate risks;
4. Evaluate Performance: assess both company and individual employees objectives;
5. Reward Employees: if company and employees have achieved their objectives, employees should be fully rewarded.

The advantages are:
– Easy to measure;
– Clear personal goals;
– Link with corporate goals.

The disadvantages are:
– Potential conflicting goals;
– No link with processes;
– No link with actions.

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