Management by objectives (MBO), also known as management by results (MBR), is a process of defining objectives within an organization so that management and employees agree to the objectives and understand what they need to do in the organization in order to achieve them. The term “management by objectives” was first popularized by Peter Drucker in his 1954 book The Practice of Management.
MBO is a top down approach to ensuring that everyone in the organization has a set of goals that are related to the organizations top level goals. This is a high level process used by many organizations as a management method.
MBO fits nicely with agile and scrum, since it is similar to the way scrum is used to manage development. In scrum, the first step is to choose the theme(s) for the upcoming set sprints. This is equivalent to the high level objectives chosen by management. In the case of scrum it is done by the product team, based on a product roadmap that they own.
This then gets translated (via selection of backlog of user stories) by the sprint team into the objectives for each sprint, so that the set of sprints meets the objectives of the selected theme.
Taken together, MBO and scrum enable a link from the top executive management all the way down to development teams, making sure that all objectives are aligned. MBO defines the “What”, scrum defines the “How”.