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MBO Programs Help Employees Reach Maximum Potential

Sep 23, 2014
6 min read
MBOs are a great way to motivate employees to reach their maximum potential. Here is everything you need to know to implement them in your sales organization.

MBO Program Definition

An MBO Program (Management by Objectives) is a method of establishing clearly defined goals between management and employees, with the aim of enhancing organizational performance. The goals set for each person stem directly from higher-level organizational goals, ensuring that companies reward the right employee behaviors that improve the bottom line.

This isn't to be confused with OKR (Objectives and Key Results). View the differences between MBO and OKR.

Ultimately, while it may be overlooked, maintaining engagement is one of the most crucial and fundamental pains for any business, and ignoring it only sets you up for disaster later. With an MBO program, you can boost morale in the workplace, avoid the hassle, inspire performance, achieve growth, and keep everyone engaged and happy in the process.

The Need for MBO Programs

Where does employee engagement rank on your list of priorities? Based on current surveys, it should be among your top concerns.

A recent study showed that as many as 75% of employees are not fully engaged in their work, 48% of employees don’t enjoy their job, and 18% of employees were actively disengaged – or more accurately, were disgruntled and maliciously counterproductive.

Consider that next time you look out over the bullpen, or walk past a bank of cubicles: Only one out of every four people you see are, statistically speaking, fully engaged in their work. Nearly two out of every four are unhappy, and one in five are destructively disengaged. This is troubling certainly, but more than anything it is universal, and deeply rooted in the employee mindset.

There’s no way around it, as most people would choose leisure over work if they could, and the number of people with internal motivation and drive are dwindling.

How to Overcome the Challenge

To start, you need to understand the definition of a disengaged employee, and then fully consider what exactly causes employees to disengage from their work. Most people have a bandwidth of effort they can and are willing to expend on anything, and work is no exception.

If a work environment is inviting and engaging, employees are far more likely to reciprocate effort and patience; conversely a workplace that is unfavorable turns people off to the idea of exerting themselves, leading to the staggering numbers for disengagement.

What then are these workplace stressors, the parts of your office that are keeping your people from maximizing their potential?

Here are a few areas of consideration:

Micro/Macro Management

When employees feel coddled or untrusted, it greatly reduces their ability to function or engage with their work. Feedback and accountability are important, but micromanagement gets in the way of actual growth, and does not allow employees to meet their full potential.

The inverse of this problem, The annual review, is also an issue. Giving people too much oversight is stifling, but once a year meetings are just as detrimental. Here are some sales performance review best practices.

In addition to being grossly incapable of surmising a full year’s effort and dedication, it also allows good behavior to go unrecognized and unnoticed. You can’t afford to let your floundering employees continue unaided, nor can you afford to let your good employees lose interest because they are not appreciated. The key for maintaining engagement is to find the right management balance; not too much, not too little, but just right.

Management by Objectives Software

Management by objectives software, specifically, allows for far more engagement than a manual, spreadsheet-based option with zero flexibility or error-checking capabilities. An automated system is all about providing employees with an intuitive approach hosted in the cloud for maximum transparency.

All parties can then clearly see how performance is linked to incentives, which facilitates company growth by virtue of employee effort, and empowers employees to meet these objectives. All of this results in high-performing teams and enhanced company culture.

Additionally, having a strong, automated incentives compensation plan is a must for keeping employees engaged across all sectors. Without it, you run the risk of employee aims not being in line with company goals, and you miss out on the power of transparency to motivate and inspire performance.

Companies that use outdated manual systems suffer 88% more disputes, have a 37% slower sales cycle, and grow 2x slower than companies that automate. In addition, MBO programs that are automated and easy to adjust provide a greater range of options to both the HR admin and the employees they are created for.

Corporate Culture

This is a big one for engagement, as it defines the workplace and how comfortable your employees are within it. The biggest mistake any company can make is not using its MBO’s and incentives to encourage behavior and alignment within its workforce (here are a few MBO examples to review).

A recent study showed that only 42% of employees actually know their organization’s vision, mission, and values, but companies that manage to create a culture of knowledge around this core are able to unite their corporate aims and employee goals, and ultimately achieve more.

Another branch of cultural engagement comes from coworker compatibility, or the ability of your employees to get along and interface well with each other. What you want ultimately is an environment where everyone knows each other, likes working with one another, and feels comfortable approaching anyone for help and guidance.

This kind of collaborative environment boosts productivity and engagement dramatically, and it may even come about naturally in a small-scale team setting. But as companies grow and focuses shift away from the individual, it becomes harder and harder to expect employees to create this kind of environment on their own.

HR and management need to work together to foster this kind of engaging environment, because the difference in productivity and dedication between companies with an engaging culture vs. companies without is staggering.

So, what are the fixes to these big engagement issues? How can you keep your employees from becoming disengaged, or actively malicious to the company? By implementing an automated Performance Management System, you can actually alleviate all of these pains, and create a more inspired, engaged, and growth oriented company culture. A simple MBO program can provide just such a fix.

The Goldilocks Principle

Simple MBO systems give managers the ability to input goals and values on the fly, which employees can track weekly, monthly, quarterly, or yearly. Companies that use an MBO system to set performance goals quarterly generate 31% greater returns from their performance process than those who do it annually, and those who do it monthly get even better results.

This kind of performance setup is flexible, easily manageable, non-invasive, and engaging; you can inspire and manage employee performance, and align their goals with your corporate aims. Your workforce can have total visibility into what they need to do and when they need to do it, and more importantly, the impact their work has on corporate objectives.

MBO’s are more empowering than micromanagement, and provide more feedback and oversight than annual reviews. It's not too much, or too little, but just the right amount of contact to keep your workforce engaged and on point.

Inspire Performance

With an automated and cloud-based solution, you can raise efficiency on all fronts and create engagement through clarity. The visibility and ease of access provided by an MBO program means that any time an employee wants to check their progress towards their goals and attached MBO bonuses, they can do so effortlessly.

And because employees can directly monitor their goals and see how they affect overall company growth, they receive the important feedback they need simply by using the system itself.

As employees do good work and meet goals, they can see how they will be compensated clearly, which encourages and motivates successful behavior. A simple MBO system creates a perpetual incentives machine, reinforcing successful behavior by rewarding it in real time, and by providing visibility into which behaviors generated the best results.

Culture Shock

Finally, the work an MBO program does on the incentive and management side serves a third purpose:Fostering a great company culture. With a less stressful and more inviting performance system, employees and managers can finally converse across job lines, without the fear of annual reviews or the frustration of micromanagement.

Managers can create individual and shared goals,and by tying these objectives to corporate goals they can empower both their workforces and their businesses. You can also make parts of a company’s vision an objective, incorporating team building exercises and philanthropic excursions into the fabric of your workforce.

And with the ultimate goal of creating a more productive and engaging environment for your employees, nothing is more effective than creating a culture of friendly competition, where striving for success and completing objectives is the norm.

So, is employee engagement at the top of your to-do list yet? Contact Xactly to learn more about MBO’s, and start engaging your workforce today.

  • Incentive Compensation
  • Sales Coaching and Motivation