The Difference Between Management By Objectives and The Balanced Scorecard

Management by Objectives involves an organization creating goals and objectives at the highest levels of the hierarchy, directly driven from the mission and vision, then passing these goals on to everyone in the organization to adopt, adapt and achieve.  The goals and objectives are reviewed periodically to monitor progress and to reward employees who perform well.  It is a very organized process during which and was first introduced Peter Drucker in 1954.  

In contrast, the Balanced Scorecard provides metrics and feedback on how the goals are being achieved, how employees are performing and how business can be improved.  It looks at customers, historical data, finances, processes and innovation to measure quality and quantity.  Whereas MBO typically provides the direction needed around the goals and objectives of the organization, the Balanced Scorecard helps provide a balance platform upon which to properly evaluate how well the directions from MBO are being implemented, and what efficiencies can be gained. 

Commonly, organizations rely on MBO - Management by Objectives to deliver on the performance appraisal process.  Too often enough, we forget that its the numbers that will tell the story, and that it has to make sense.  So let's consider the front nine and back nine of the MBO process, where MBOs need to be complemented with a Balanced Scorecard which would increase in complexity depending on the organization.