Difference Between MBO and MBE

Edited by Diffzy | Updated on: May 13, 2023


Difference Between MBO and MBE

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Management by objective and management by exception are concepts of management. These are the management models. The objective of models is to focus on those goals that are attainable and are the ultimate goal for an organization. It also channels the efforts towards the achievement of all possible results.

Management by objective is also called MBO. MBO is a management system in which every member participates in the organization. Management by exception is also known as MBE. MBE is a strategic model. In this situation, the manager only focuses on the most important and urgent matters and makes the most important decisions.

Management by objective (MBO) vs. Management by exception (MBE)

The difference between management by exception (MBE) and management by objective (MBO) is mentioned in the management practice and principle.

We have various management authors, and they have proposed myriad models of management. These models suit different sorts of leadership styles and influence motivation and ideologies. Management by exception and management by objective is important models among the various available models. Both MBO and MBE have their advantages and disadvantages. Now, we have to focus on these models.

Management by objective is a process in itself. With the help of MBO, we can achieve specific goals that are set for the organization, whereas management by exception is a policy through which management focuses its time to identify only those situations where the actual results are different from the planned results.

Difference between management by objective and management by exception in tabular form.

Parameters of comparisonMBOMBE
Full formThe full form of MBO is management by objective.The full form of MBE is management by exception.
DefinitionManagement by objective is a special process that defines the objectives of an organization. By doing so, the management and the organization's employees agree and understand what is required to be done in an organization.MBE is a type of policy by which management gives its time to investigate only specific situations where the expected results deviate from the planned results
Participation of employeesThe participation of employees is high in MBO. This differentiates it from the MBE on the grounds of employee participation.The participation of employees is low in MBE.
ObjectiveTo judge the performance to relate it to the performance of organizational goals.The MBE works to free up the time of the organization and management so that important things can be given more time.
NatureThe nature of MBO is defined as a decentralization philosophy.The nature of MBE is defined as a technique of control.
FunctionMBO helps the organization set goals. Which further help the organisation to achieve these goals.MBE helps in reporting exceptions to the top-level executives of the organization.

What is management by objective (MBO)?

A management strategy to raise a company's performance is called "Management by Objectives" (MBO). They accomplish this by outlining the goals in detail. These goals are established by the company's management after first seeking employee input. It is predicated on the idea that involvement and commitment among employees will rise when they have a say in goal development and action plans.

Are you aware?

  • Peter Drucker was the one who initially put forth the idea of management by objectives (MBO). But George Odiorne is the one who came up with this idea.
  • MBO identifies the main corporate goals and uses them to determine staff goals. To accomplish the objectives, the members of the organization define and convey the organizational goals to the staff.
  • The purpose is to give the staff guidance. As a result, they are completely informed about their responsibilities at work. The duties and responsibilities of the personnel are also decided by it. Additionally, it determines the future path of action.
  • It demands agreement on clearly stated objectives among the various levels of management.

In other words, we define management by objective as management by results.

  • Under this process, the company's employees and management collectively determine similar objectives. It uses them as a criterion to fulfill the organization's targets and goals.

Features of management by objective, or MBO

  • Goal-Oriented: Management by Objective, or MBO, emphasizes making the individual goals connect with the organization's goals. The goal is to fulfill the responsibilities of the organization. Also, make sure the organization remains joint.
  • Participation in MBO: Management by Objective, or MBO, is a process that needs high-level participation from employees in the establishment of appraisals and goals of performance for the organization. So, every employee has the opportunity to make decisions and comprehend the job relationship.
  • Key Result Area, or KRA: Management by Objective, or MBO, focuses on improving the organization's performance in those areas where it is of utmost importance to identify key result areas (KRAs).
  • Systems approach: Management by objective operates on the approach of systems to manage the firm. It wants to integrate individuals with firms and firms with the environment of business.
  • Optimization of resources: The objective aim of management is to fulfill the possible uses of the resources and HR of the firm.

Process followed to achieve management objectives Steps are important to follow as they work as a blueprint.

Step 1: Setting goals for the organization

Step 2: Define the objectives of employees.

Step 3: Conveying the organizational objectives to the employees

Step 4: Monitor progress and performance continuously.

Step-5 performance evaluation

Step 6: Provide feedback

Step 7: Rewards achievement and performance appraisal.

What is management by exception?

It is also an important management term and has a lot of importance for the well-being of an organization. The idea of Management by Exception (MBE) was introduced by Fredrick Winslow Taylor in 1919. It is a "policy by which management devotes its time to investigating only those situations in which actual results significantly differ from planned results," known as management by exception. In short, management by exception encourages the participation of stakeholders at all levels of an organization in the analysis of problems, development of strategies, and implementation of solutions. It is also known as employee involvement or participative decision-making.

It has been stated simply as a "system of identification and communication that signals the manager when his attention is needed." Conversely, it stays silent in those conditions when attention is not necessary. The basic objective of management by exception, or MBE, is to simplify the process itself and allow the manager to look for the problems that need action and to deal with those that are handled better by subordinates.

Management by exception (MBE) is a particular type of philosophy that allows the management to target essential and critical matters and make vital decisions on them. It also allows the front-line workers to finish their day-to-day activities. Hence, supervisors can centralize attention and efforts on more important issues. According to this, employees of the organization carry only selected issues to the management that are crucial by nature. It entails exceptional items with significant discrepancies in regular activities. Here, less important and usual items are not brought to the attention of top-level management. According to this strategy, employees are given decision-making authority for some tasks. Additionally, if there are any deviations, the company faces problems, and the personnel are unable to control the situation at their level. In this situation, the employee should speak with their immediate employer and let them know about the situation.

It seeks to make the best use possible of management time. This is made possible by only involving them when there are deviations from the regular tasks. This tool's purpose is to assist the manager in locating and separating the problems that necessitate his choices and actions. As a result, they should focus less on problems that can be solved by subordinates and do not require extensive brainstorming.

Importance of management by exception

  • Management by exception has various important functions in an organization, which are
  • Easily determine the responsibility: standards of job performance, objectives, duties, and rights are mentioned in-depth for different management levels.
  • Time-saving: Management has a lot of issues they have to deal with that need their time and attention. By delegating authority over day-to-day jobs to the junior staff, the management always has enough time to think about matters that are crucial to the organization.
  • Optimum utilization of abilities: Management by objective provides the authority for different levels of management. According to this, every individual has a different managerial level. So, he is responsible for all outcomes.
  • Rise in Productivity: Here, delegation of authority takes place, but at the lower and middle levels of management. It creates a sense of belonging and also improves performance.
  • Development of subordinates: With rising responsibilities, subordinate employees start learning how to handle different issues on their own without reaching out to their manager. It trains them, helps in developing their decision-making abilities, and also improves their working abilities in organizations.

Process of management by exception, or MBE

  • Identification and understanding of key result areas It is first important to identify the key areas in an organization.
  • Standards define and outline deviations. Preferentially for K.R.A.'s
  • Comparison of actual results with planned and standard results
  • Computation and analysis of results
  • Preparing a strategy and taking corrective actions

Difference between management by objective and management by exception in points.

  • In terms of efficiency, in MBO, the entire organization participates. Due to this organization's participation, efficiency decreases. But the efficiency in the case of MBE is high in comparison with MBO.
  • Management by objective is suitable and appropriate for managers who are experienced in their work. But management by exception is suitable for organizations where execution is experienced.
  • Management by objective (MBO) and management by exception (MBE) are different in terms of dependency as well. The dependency in the case of management by objective is low, but when we talk about management by exception, the dependency is high.
  • In management by objective, there is no responsibility ambiguity. It is because all responsibilities are assigned. On the other hand, in the case of management by exception, there is ambiguity in management responsibility because responsibilities are not assigned.
  • MBO is defined as a strategic management tool that is used to increase the performance of organizations by understanding and defining the objectives that both employees and management agree upon collectively. But MBE is a system that identifies and reports any issues to management only.
  • In MBO, communication and feedback are required to ensure progress toward the organization's goals. But in MBE, communication and feedback occur when some things deviate from standards.
  • Decisions in MBO are based on the attainment of goals. In MBE, the decisions made are based on established standards.
  •  Employees in MBO are always involved in the process of setting goals and taking responsibility for objective achievement. In MBE, employees of the organization are responsible for fulfilling established standards.
  • The emphasis in management by objective is placed on achieving goals and setting goals. The emphasis on management by exception is placed on controlling and monitoring performance.
  • Regular feedback and communication are important to ensure progress toward the organization's goals. But communication and feedback are primarily created when deviations are identified.
  • In management by objective, the evaluation and implementation of progress toward goals in the organization are ongoing. Evaluation and implementation occur upon the identification of deviations.


We have discussed how management by objective (MBO) and management by exception (MBE) are different and how they can be understood most simply. Also, we have discussed the difference between management by objective and management by exception with the help of various points, such as efficiency. In management by objective, the entire organization's employees participate in the organization, which leads to less efficiency. Then management by objective is appropriate for managers who are experienced in working environments. But MBO is appropriate for experienced executives.

There are various other important points that are important to understand the concept and that points are discussed in this article, and we hope this will help you understand how these two management terms are different and can be understood simply.


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"Difference Between MBO and MBE." Diffzy.com, 2024. Wed. 12 Jun. 2024. <https://www.diffzy.com/article/difference-between-mbo-and-mbe>.

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