Key Takeaways
- Management by Objectives (MBO) is a systematic and collaborative approach to management that focuses on setting goals within an organizationorganization.
- Management by Exception (MBE) is a management approach that focuses on significant deviations from established standards.
What is MBO?
Management by objectives (MBO) is a systematic and collaborative approach to management that focuses on setting specific organizational goals and objectives. Management guru Peter Drucker developed it in the 1950s, and it has remained a popular management strategy for enhancing performance and achieving organizational success.
MBO begins with the establishment of clear, measurable and achievable objectives that align with the overall goals of the organization. These levels can be set at various levels, from the top management to individual employees. MBO offers several benefits to organizations, including increased employee management, improved communication and greater alignment with organizational goals.
MBO involves goal setting, planning, monitoring and measurement and feedback and evaluation to access an individual working in an organization. There is also a provision of rewards and recognition to the employees who successfully achieve their objectives and are recognized for their efforts.
What is MBE?
Management by Exception (MBE) is a management approach that focuses on intervening only when there are significant deviations or exceptions in the performance from the established standards or expectations. MBE is concerned with the efficient allocation of managerial attention and resources.
MBE can be advantageous for organizations with complex operations and limited managerial resources. It ensures that management’s time and energy focus on critical issues, allowing quicker responses to problems. However, it may also lead to neglect of routine tasks if exceptions dominate management’s attention.
Some key features of MBE include- establishing standards, monitoring, intervention, conservation of resources and automation and technology. This approach is rooted in the principle that managers should focus primarily on addressing critical issues rather than managing routine activities. MBE has evolved and can be applied to various management aspects, including finance, operations and human resources.
Difference Between MBO and MBE
- MBO focuses on setting clear, measurable objectives and goals for individuals and teams, while MBE, on the other hand, centres on intervening or taking action primarily when significant deviations or exceptions from established standards occur.
- Goal setting is a central component of MBO and involves collaboratively defining objectives that align with organizationalorganizational organizationalorganizational goals, providing a roadmap for performance. MBE does not primarily involve setting goals. Instead, it consists of establishing clear standards or benchmarks and identifying deviations from them.
- Monitoring progress towards objectives is integral to MBO, which involves regular assessment and feedback to track performance. At the same time, MBE relies heavily on continuous monitoring, but the focus is on identifying exceptions or significant deviations from established standards.
- Managers in MBO are actively involved in guiding and supporting employees to achieve their objectives, while managers in MBE intervene when exceptions arise, conserving their attention for critical matters and utilizing a more reactive approach.
- Actions and decisions in MBO are taken during the planning phase and throughout the execution of the established objectives. In contrast, actions in MBE are triggered when significant exceptions occur, requiring immediate attention and resolution.
Comparison Between MBO and MBE
| Parameters | MBO | MBE |
|---|---|---|
| Focus | Setting clear, measurable objectives and goals for individuals and teams | When significant deviations or exceptions occur |
| Objective | Goal setting | Establishment of clear standards or benchmarks |
| Monitoring | Integral to tracking performance | Relies heavily on continuous monitoring |
| Managerial attention | Actively involved in guiding and supporting employees | Intervenes when exceptions arise and conserves their attention for critical matters |
| Timing and action | Taken during the planning process | Triggered when significant exceptions occur requiring immediate action and resolution |
- https://journals.sagepub.com/doi/pdf/10.1177/030630708801400202
- https://www.emerald.com/insight/content/doi/10.1108/mbe.2003.26707aae.005/full/html
Last Updated : 26 February, 2024
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.
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