Skip to main content

Understanding The Role of Management by Objectives (MBO) in Sales

Dec 06, 2023
5 min read

Management by Objectives (MBO) is the process of managing individual goals that improve overall sales performance. This article provides an overview of MBO and how to implement in your objective planning to increase your sales team engagement.

What is MBO?

MBO works by defining top company goals and using those to determine the goals and objectives of individual employees in a way that makes them easy to assess and grade. When done well, an MBO program can help motivate disengaged employees by making it easy for them to see how their work contributes to the company's wider mission.

Why do you need an MBO?

An MBO program helps managers direct, focus, and motivate their employees. Properly implemented, the MBO program can help promote:

  • Collaborative teamwork, across all levels and departments 
  • Increased efficiency, as everyone knows their goals and is working on things that match their skill sets
  • Motivated employees, as they help motivate and empower them 

MBO programs are tailored to the organization, as every business does things differently based on its goals, objectives, and staff make-up.

How Sales MBOs Affect Team Engagement and Motivation

MBO programs, especially ones that are automated, can be an extremely useful tool in addition to your sales commission structure. As part of your compensation plan, MBOs give each rep individual goals to strengthen the overall sales organization. And, they can have a big impact on sales team engagement and motivation.

By offering MBO bonuses, you can streamline your incentive program, focusing on easy-to-understand outcomes. Giving employees three to five goals, depending on their level of experience, and offering them the chance to work on personal goals ensures that they feel like a part of the team and is valued for their contributions.

Drive Sales Team Engagement with These Industry MBO Examples

Use the MBO examples to help visualize how your goals and objectives might differ by industry and role. As always, these goals should be specific to your company culture and each individual rep's talents. You should also note that your commission and compensation plans should follow this same rule.

Ultimately, these examples demonstrate how successful companies go through the process of making achievable goals alongside their reps for the entire sales organization—and not against them.

Software sales MBO

The competitive world of software sales lends itself to MBO programs quite well. Your organizational goal might be to increase the number of licenses/seats sold or the number of subscribers for a SaaS solution. An MBO program gives sales team members the chance to set achievable goals that are more focused than simply "selling more."

For example, someone who deals with smaller organizations may not be able to net huge sales, but could have goals focused on retention, selling extra features or onboarding new clients. Team members who focus on outbound sales and larger organizations might have the goal of getting existing customers to purchase more seats, transition prospective customers from rival applications to the company's ecosystem or upgrade from a legacy license to the current package.

Online marketing MBO

An MBO program is a great tool for driving the behavior of non-sales-related activities, too. For instance, those in digital or online marketing are tasked with something along the lines of increasing site traffic, conversions, etc. A broader organizational goal in this regard could be something like “Increase brand authority and become an industry influencer.”

Putting that goal in MBO form could look like:

Joe Smith; Q3 2024; Target: $3,000

Goal: Publish 30 blogs that demonstrate our authority/status as industry leader by 10/31/24:

  • Brainstorm list of 50 blog topic possibilities by 8/15/24 (10%, $300)
  • Schedule 30 blog topics by 8/31/24 (10%, $300)
  • Publish 15 Blog Posts by 9/31/24 (40%, $1,200)
  • Publish 15 Blog Posts by 10/31/24 (40%, $1,200)

Hi-tech manufacturing MBO 

An MBO program helps someone in high-tech manufacturing keep on track with longer-term goals, such as building relationships and networking. The sales pipelines in this industry can be longer than in consumer industries, so a goal could be:

Patrick Jones: Q4 2024

Goals: Raise the profile of the organization within EMEA territories

  • Attend two major industry conferences and book appointments with at least 15 responsible buyers.
  • Book follow-up appointments with at least half of these buyers
  • Submit a presentation in response to a CFP for the Q1 2025 Industry Expo

Revenue and sales operations MBO

Setting actionable goals for Revenue and Sales Operations can be a challenge. The organizational goal may be to increase revenue by 20% by the end of the financial year, or to hit specific sales targets each quarter. Effective MBO can narrow this down to smaller goals that feel much easier for the team to reach, improving motivation. Some example goals are:

  • Reduce the number of canceled subscriptions by 10%, increasing the average lifetime value per customer.
  • Better-qualify leads to increase the quality of discovery meetings and shorten the sales cycle.
  • Perform market research to find value-adds to upsell to existing customers.

Pharmaceutical sales 

Talk about a juggling act—regulation, generic competition, constraints of costs, health care reform, and more are all challenges those in pharmaceuticals need to overcome. Measurable goals for pharmaceutical sales can cover a wide span of activities. For example, you could set MBO for:

  • Appointments set each month
  • Doctors talked to each week
  • Quantity of product sold within a given time period

Employee performance management software can assist in mitigating the risk of losing critical data about events and documents, while allowing you to easily follow the audit trail.

Retail sales MBO

Retail is a crowded industry, and managers are always looking for ways to ensure their stores' profitability. A retail sales MBO helps translate management's pronouncement that "this store needs to increase revenue by 20%" into something each employee can contribute to in a quantifiable way. 

To achieve the goal of boosting revenue by 20%, each staff member may need to sell 10% more products per shift. However, not all staff members may have the opportunity to get sales credited to their names. Other goals that still benefit that bottom line might include:

  • Enroll 20% of currently unenrolled customers into the loyalty card program
  • Sell at least 10 items from the Point of Purchase promotional stands per day
  • Reduce lost sales through proactive service, such as helping customers find an alternative style/size if something is not in stock

Compensation MBO

Compensation management is a job role that is already quite niche. Compensation managers are in charge of designing the most effective compensation packages to boost the performance of team members and have a positive impact on the organization's bottom line.

An MBO for a compensation leader focuses on how they can improve the performance of all members of the team, such as:

  • Run a specified number of SPIFs per year, with each one driving a 20% increase in sales performance.
  • Increase employee retention through the use of motivational bonuses and compensation packages.
  • Keep packages within the budget for the year and successfully implement two new non-monetary or tax-advantaged compensation packages that are highly rated by employees.

Unlock the Power of MBO in Sales Compensation 

Sales staff already have compensation packages, sales performance incentives, and an extensive list of targets or quotas as a part of their role. MBO can help streamline these targets/quotas and make it easier for the sales team to prioritize their goals. For example, a sales staff member might be given goals of:

  • Closing a given percentage of leads already in the pipeline
  • Adding at least three new qualified leads per day to their contact list
  • Increasing the average value of their first customer order by 15%

These goals encourage the sales team member to focus on high-quality leads and close deals, ensuring their efforts are properly focused on boosting your bottom line.

Xactly offers a number of tools for incentive compensation management and employee performance management. Xactly Incent and Xactly Objectives offer powerful and flexible analytics and reporting tools that empower you to better manage your employees and unlock their full potential. If you'd like to know how we can help you automate your MBO, create and manage SPIFs, and get valuable insights into the effectiveness of your compensation plans, contact us today to schedule a personalized demonstration.

  • Incentive Compensation
  • Sales Coaching and Motivation
Xactly "X" logo, left half orange and right half grey
Xactly News Team

The Xactly News Team reports on the latest product, events and market trends taking place within Xactly and throughout the revenue intelligence industry.