Peter Drucker

“Management by Objectives”

By Felipe Cazou
 Biography
The son of a high level civil servant in the Habsburg empire, Drucker was born in Vienna,
the capital of Austria, in a small village named Kaasgraben (now a suburb of Vienna,
part of the 19th district, Döbling). Following the defeat of Austria-Hungary in World
War I, there were few opportunities for employment in Vienna so after finishing school
he went to Germany, first working in banking and then in journalism. While in
Germany, he earned a doctorate in international law. The rise of Nazism forced him to
leave Germany in 1933. After spending four years in London, in 1937 he moved
permanently to the United States, where he became a university professor as well as
a freelance writer and business guru. In 1943 he became a naturalized citizen of the
United States. He taught at New York University as a Professor of Management from
1950 to 1971. From 1971 to his death he was the Clarke Professor of Social Science
and Management at Claremont Graduate University.
His career as a business thinker took off in 1945, when his initial writings on politics
and society won him access to the internal workings of General Motors, one of the
largest companies in the world at that time. His experiences in Europe had left him
fascinated with the problem of authority. He shared his fascination with Donaldson
Brown, the mastermind behind the administrative controls at GM. Brown invited him
in to conduct what might be called a political audit. The resulting Concept of the
Corporation popularized GM's multidivisional structure and led to numerous articles,
consulting engagements, and additional books.
Drucker was interested in the growing effect of people who worked with their minds
rather than their hands. He was intrigued by employees who knew more about certain
subjects than their bosses or colleagues and yet had to cooperate with others in a
large organization. Rather than simply glorify the phenomenon as the epitome of
human progress, Drucker analyzed it and explained how it challenged the common
thinking about how organizations should be run. Drucker died November 11, 2005 in
Claremont, California of natural causes. He was 95.
Management By Objectives Theory
 What is this theory about?
MBO (Management By Objectives) relies on the defining of objectives for each
employee and then to compare and to direct their performance against the objectives
which have been set. It aims to increase the performance of the organization by
matching organizational goals with the objectives of subordinates throughout the
organization. Ideally, employees receive strong input to identify their objectives, time
lines for completion, etc.
MBO includes continuous tracking of the processes and providing feedback to reach
the objectives.

 Principles of Management by Objectives:

- Cascading of organizational goals and objectives,
- Specific objectives for each member,
- Participative decision making,
- Explicit time period, and
- Performance evaluation and provide feedback.

 Management by Objectives also introduced the SMART method for checking the
validity of the objectives, which should be 'SMART':
- Specific
- Measurable
- Achievable
- Realistic, and
- Time-related.