Management by Objectives is a tool used to implement the strategic decisions of leadership in a hierarchical structure. Once a strategic decision is set, aligned objectives are then put in place across the organisation; the assumption being that, if everyone achieves their objectives, the strategy will come to fruition.
Why is Management-by-Objectives seen as necessary?
The combination of the predict-and-control (see: "What is predict-and-control?") and command-and-control approach (see: "What is command-and-control?") to running a status quo organisation presents a problem: leadership must find a way to corral the effort and intellect of its employees to deliver on its plan. It must provide a direction (in line with where the leadership wants to go) and milestones (to evaluate progress).
The answer to that problem is to set objectives and pass them on.
Who decides what these objectives are?
Largely, these objectives are imposed by, or agreed alongside, a manager. However, that doesn’t mean they’re accompanied by a highly detailed plan of action: the CEO of a global organisation doesn’t know the minutiae of how the front line is achieving their set objectives. But the CEO does believe that, overall, objectives are being cascaded down, set and pursued in line with the vision and strategic plan that has been imposed from above.