This blog unpacks the MBO meaning in sales and ties them to sales enablement.
According to Celeverism, some of the more successful companies that implemented management by objectives (MBOs) goal frameworks include Hewlett-Packard, Xerox, and Intel.
Management by objectives (MBO) involves a process of assigning employee tasks based on company goals.
Marketing departments, for example, typically adopt MBOs by aligning their goals with company objectives.
In practice, say a marketing goal involves doubling its email list in one year. Following an MBO approach, employees gather performance data to determine how well the team can perform with current resources. Then they define everyone’s role in the marketing team and create a list of objectives for each team member to complete in order to reach the larger goal.
Management then researches which step to take to double their email list, apply new information to each employee’s individual goals, and determine whether to hire more people to manage the workload.
According to Hubspot, this approach gives employees an understanding of how their job functions relate and add to company success.
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The origin of MBO and who it’s best for
What are MBOs and where did they come from? Author, consultant, and educator Peter Drucker first introduced the MBO term in his 1954 book, The Practice of Management by Peter Drucker. The concept grew in popularity throughout the 60s. And, by the 80s and 90s, MBOs had become a regular practice in the workplace.
Any business model could benefit from MBO goals, but for fast-paced work environments with quickly scaling benefits, MBOs are a must, according to Adobe.
Think SaaS sales teams.
MBO meaning in sales doesn’t change too much from its original definition, only that it is directly tied to sales performance in revenue and enablement.
MBO meaning in sales revenue examples
- Expand sales abroad by 10%
- Achieve new bookings target of 50 per month
- Achieve an average deal size of $150,000
Sales enablement MBO examples
- Decrease sales cycle to three months
- Build teamwide quota attainment to 80%
- Provide sales asset management that saves sellers 90 minutes a week
- Train and ramp new sellers faster to competence following a defined set of criteria
- Increase win ratio by 10%
- Achieve a payback period of 1.5 years for new products
Now that you have a better idea as to how MBOs work for a company from a management and team member’s perspective, here are five ways to put MBOs into practice.
- Define objectives: First, determine objectives for the entire company. Once you determine those goals, then each department should come up with department goals and how each individual will help to achieve these.
- Share objectives with employees: Use the SMART acronym when sharing with the team (specific, measurable, acceptable, realistic, time-bound) to define the objectives.
- Encourage employees to participate: Invite your employees to help determine the department and individual goals. This will motivate them beyond company achievements.
- Monitor progress: Consistently check on the progress of goals and share updates regularly with the team. Based on what’s achieved or not achieved, teams may need to redefine goals and objectives.
- Evaluate performance and reward achievements: This step requires honest feedback from upper management. Leaders should meet one-on-one with individuals, review their progress, achievements, or lack thereof toward their individual MBOs for those who hit their MBOs, and reward them accordingly. For those who didn’t, provide coaching, support, and possibly a new MBO, or path, to achieve those goals.
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MBOs pros and cons
Just like everything else, there can be pros and cons. MBOs are no exception.
According to Investopedia, boosting employee participation and loyalty happens when MBOs align with company objectives.
However, some critics say MBOs encourage employees to achieve goals by any means necessary, even at the cost of the company.
Here are a few pros and cons to consider.
- Employees understand their goals and take pride in working toward them and accomplishing achievements.
- Creating one-on-one time with an employee to assign tailored goals will increase output and long-term happiness within the company.
- One-on-ones increase communication between the manager and the employee.
- Management creates goals that directly impact the success of the company.
- Although MBOs focus on company goals and output, they may create an environment solely focused on those targets. Other parts of a work environment can be just as important like having a healthy/work-life balance or areas of contribution, which MBO structures compromise.
- The risk of employee stress increases because deadlines have become more regimented in order to reach goals.
- Employees may feel that they have to reach goals by any means necessary, which could mean cutting corners and compromising the quality of work.
- If management only relies on MBOs, then other responsibilities may fall off the radar if they don’t fit under the MBO.
All MBO goals can be measured using technology to monitor employee progress and track activity. This will allow managers to generate reports, track deal information and sales activities based on individuals, and set a specific timeline.
QuotaPath’s commission tracking software can help. Our platform tracks revenue objectives so reps can easily see their quota attainment, commission progress, and their projected earnings forecasted based on their existing pipeline. It’s easy for reps to see how much they’re earning from every deal while keeping track of how close they are to hit their quota. That means management can track their team’s overall performance with the team leaderboard while also understanding some shortcomings, allowing them to test “what if” scenarios. To learn more, book time with our team. Or, get started for free with a 30-day trial.