MBO is the process in which managers and their employees jointly set objectives. MBO has three steps: Step 1. Set individual objectives and plans. You set objectives with each individual employee. The objectives are the heart of the MBO process and should meet the “must” and “want” criteria. Step 2. Give feedback and evaluate performance. Communication is the key factor in determining MBO’s success or failure. Thus, you and your employees must meet frequently to review progress.

Step 3. Reward according to performance. Employees’ performance should be measured against their objectives. Employees who meet their objectives should be rewarded through recognition and so on.