The concept of management by objectives goes back almost 50 years ago. The concept of management by objectives is about converting overall objectives into specific objectives for units and individual members of an organization. We can define management by objectives as a system in which specific performance objectives are jointly determined by subordinates and their supervisors. The progress toward objectives is periodically reviewed, and the rewards are allocated based on that progress.
There are four common ingredients in management by objectives programs. The four common ingredients are goal specificity, participative decision making, explicit time period, and performance feedback.
In management by objectives, the objectives should be concise statements of expected accomplishments. For example, doing things like stating the desire to cut costs and to improve quality is not enough. The desire should be converted into tangible objectives that can be measured and evaluated, such as to cut costs by 15 percent, and to increase quality and keeping returns to less than 1 percent of sales.