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Management by Objectives (MBO), developed by Peter Drucker, relies on the defining of objectives for each employee and then comparing and directing their performance against the objectives which have been set. The goal to increase the performance of the organization by matching organizational goals with the objectives of employees throughout the organization.

MBO is based on the thinking that various hierarchies within companies need to be integrated. There was a need for commitment, responsibility, and maturity. MBO becomes a process by which the objectives of an organization are agreed to and decided between the management and the employees. Through this approach, the employees understand what is expected of them and help set their own individual goals. As a result, they attain both their personal goals and the organization's targets. MBO also includes continuous tracking of the processes and providing feedback to reach the objectives.

A key underlying concept of MBO is that all objectives must be S.M.A.R.T.--i.e., Specific, Measurable, Achievable, Realistic, and Time-related.

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