Management by Objectives: How the MBO Model Can Help Your Sales Team Succeed

As a sales manager, you have an important job.

You have to develop your company's sales strategy, coach and motivate your reps, help make sure company goals are achieved, etc. It's a lot of responsibility. Fortunately, choosing a top management style, such as management by objectives (MBO), can help.

In this article, I'll explain what management by objectives is, the pros and cons of this management technique, and how to create an MBO model for your sales team.

The point? To help you decide if a management by objectives approach is right for your organization. And, if it is, to help you get up and running with MBO as quickly as possible.

Does that sound like a plan? Great, then let's get this show on the road!

What is Management by Objectives?

Management by objectives, often abbreviated to MBO, is a specific management style in which individual objectives are set, tracked, and achieved for every employee, with the express purpose of accomplishing overarching organizational goals.

Here's an example of MBO to help you fully understand this management system:

A company's leadership team wants to boost revenue by 20% in 2023. So, the sales manager bumps up each rep’s monthly sales quota by 5%.

To hit these numbers, each rep will need to contact 25 more leads per week, while maintaining their current close rate. Thankfully, the sales manager has agreed to invest in a new sales CRM to help you achieve these personal objectives and attain the key results leadership wants.

As you can see, the sales manager set individual goals that worked towards company aims. That's the management by objectives approach in a nutshell.

MBO was developed by Peter Drucker in his book The Practice of Management, which was first published in 1954. It has since been used and refined by countless others.

The Pros and Cons of MBO

Management by objectives is a flexible framework—leadership personnel in just about every department, from human resources to marketing to sales, can use it to achieve success.

That said, it's not the perfect management system for every company. To help you decide if it's right for your organization, check out the pros and cons:

The Pros of MBO

There are many benefits to the management by objectives approach. Here are five specific ones you and your sales team will experience after implementing this management technique:

• Team communication: MBO allows managers to clearly articulate each sales reps' roles and responsibilities. It also helps reps understand how their efforts impact the overarching goals of the organizations they work for. When these things happen, sales reps tend to become more engaged and achieve greater success. Speaking of…
• Sales rep engagement: Because MBO allows for streamlined communication between sales reps and their managers, engagement abounds. It makes sense when you think about it. Clarity around one's individual goals—and the way said goals affect company objectives—leads to a sense of empowerment and job satisfaction.
• Employee accountability: When each of your sales reps have defined objectives and strategic action plans to accomplish their work, you'll be able to hold them more accountable. Even better, reps will appreciate this level of accountability. Nobody wants to feel like they don't understand their role. MBO helps eliminate this kind of confusion.
• Department transparency: At the end of the day, communication, engagement, and accountability help build a work environment of complete transparency. Reps understand what they're supposed to do and why their efforts matter. This creates a general feeling of teamwork, which can do wonders for your team's retention rate.
• Company success: Finally, MBO can lead to greater levels of success for your sales team. How so? It comes back to the things we've already talked about. Reps who understand their roles usually perform them better and more efficiently. They're also happier and tend to stick around for longer periods of time, which reduces costs.

The Cons of MBO

As mentioned above, the management by objectives system isn't always ideal. Here are three drawbacks you should be aware of before using this framework to lead your sales team:

• High pressure: MBO prioritizes goal setting and attainment. This can cause reps to feel anxious when they aren't able to achieve the objectives their managers set for them. If said reps get too anxious, they may experience burnout and/or quit.
• Short-term focus: MBO requires sales managers to set small, short-term goals that help accomplish big, overarching ones. Oftentimes, sales teams get so focused on achieving these short-term goals that they forget about the big picture.
• Time and paperwork: Finally, the MBO strategy takes time to implement. Managers and reps have to meet and go through the objectives process to make sure they're on the same page. Then managers have to check in with reps to make sure they're on track, complete employee performance reviews, etc. All of this work, while important, can limit the amount of time managers and reps have to actually do their jobs.

While deploying the Management by Objectives framework, consider integrating proven project management methodologies, like Agile or Waterfall, to enhance the process. These methodologies can bring additional structure and clarity, aiding in the efficient achievement of sales targets under the MBO model.

How to Create an MBO Model For Your Sales Team

So, you've read through the MBO pros and cons above and decided you want to implement this performance management system, huh? Just use this four-step process:

1. Identify Your Goals

Remember, the management by objectives approach is all about goal setting. So, before you do anything else, choose specific objectives for each of your reps to work towards.

Just make sure that the objectives you select are SMART goals. SMART stands for Specific, Measurable, Achievable, Relevant, and Time-Bound. Let's talk about each one in more detail:

• Specific: Try to set specific goals for your team. Specific goals explain what needs to be accomplished and who needs to accomplish it. Example: John will contact 10 extra leads per day to help boost revenue for his company.
• Measurable: Specific goals are great—but only if they're measurable. That way, you can track your reps' progress towards them and give accurate performance appraisals. So, decide which metrics you'll track before you assign goals. Example: John will contact 10 extra leads per day to help boost revenue for his company by 20%.
• Achievable: Can your reps actually accomplish the goals you set for them? Achievable goals are essential. Without them, team morale will be low. Example: John will contact 5 extra leads per day to help boost revenue for his company by 20%.
• Relevant: The objectives you set for your team should help accomplish bigger business aims. This is what turns random goals into strategic goals. Example: John will contact 5 extra leads per day to help boost revenue for his company by 20%. That way, the company can hire new employees and expand into new markets.
• Time-bound: You need to give each employee objective a time frame. What date do your reps need to achieve their goals by? Example: John will contact 5 extra leads per day to help boost revenue for his company by 20% in 2023. That way, the company can hire new employees and expand into new markets in 2024 and beyond.

Set employee objectives with your sales reps. Doing so will empower them. It will also help them understand what they need to do and why those actions are important.

2. Consistently Monitor Rep Progress

Goals and OKRs aren't much good if you don't monitor them on a regular basis.

Once you set employee objectives, decide how often you'll check in with your team. Every week? Bimonthly? Once every 30 days? Just remember, this step is about monitoring progress, not micromanaging reps. You need to find the balance between the two.

You also need to be prepared to help your reps when they get off track. What can you do to ensure your team meets their goals within the time frames you previously specified?

One more thing: don't "wing" this step. If you think to yourself, "I'll check in with my employees when it feels right," you'll never do it. And your reps will probably fail to accomplish their work in a timely manner. If this happens, both department and company performance will suffer.

Instead, decide when you'll check in with your employees and assess their progress immediately after you choose goals for them to pursue. OKR software can help you set, communicate, track, and measure your team's OKR progress.

3. Recognize Your Employees for Their Efforts

While monitoring rep progress, evaluate each team member's performance. Are they falling short, meeting basic standards, or going above and beyond for your company?

Investigate underperformance. Are your reps slacking off? Did you set unrealistic goals for them to achieve? Or do they simply need to be trained to accomplish their tasks in a more efficient manner? Once you know the answer, take appropriate action to remedy the situation.

What should you do about the reps that overperform, the employees that go above and beyond to ensure they meet or exceed quota? These folks should be recognized.

There are a few different ways to recognize your team for their achievements:

• Thank them privately: Invite a top-performing rep into your office and thank them for their efforts. Or give them a handwritten note to show your appreciation. It may not seem like much, but these simple things can have a profound impact on team morale.
• Congratulate them publicly: Gather up your sales team for a department-wide meeting. Then call out top-performing reps in front of their peers and highlight the things they've accomplished. This recognition tactic has two benefits: first, it will let top-performers know how much you appreciate them. Second, it will motivate the rest of your team to try harder. Salespeople are competitive. Use this to your advantage.
• Give them a desirable reward: Lastly, give your sales reps a reward if/when they accomplish certain things. Who wouldn't want to earn a gift card to their favorite restaurant? Or a cash bonus? Or an all-expenses-paid vacation to the Caribbean? Obviously, the incentives you offer need to match the accomplishments. But the better your rewards are, the more motivated your sales reps will be, guaranteed.

Want to take your recognition efforts to the next level? Use a top-rated recognition software.

4. Use Technology to Supercharge Your MBO Process

Unsurprisingly, modern technology can improve your MBO process. The trick is choosing the right apps for your needs. Here are a few software solutions I recommend using:

CRM Software

Every sales team needs customer relationship management (CRM) software. With this tool, sales managers and their reps can store contact information, view sales pipelines, and forecast future sales. Some even allow users to automate communication with leads.

When it comes to the MBO process, CRM software can be used to monitor sales rep progress. Is your team on track to reach its goals? Why or why not? Your CRM will tell you.

Top CRM software options include: Close, HubSpot, Salesforce, Zoho CRM, and Pipedrive.

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Project Management Software

You may want to invest in project management software to manage your MBO process, too.

The right project management tool will make it easy for you to set goals, assign them to specific reps, and monitor progress—all from a single, user-friendly dashboard.

Top project management software options include: Asana, Trello, Airtable, and Notion. Moreover, here are some free project management software alternatives.

Employee Recognition Software

Employee recognition is way easier with software.

With this kind of tool, you'll be able to shower top-performers with praise and offer them rewards for their efforts. Plus, since many of these tools operate like miniature social media sites, you'll be able to build community and camaraderie amongst team members.

Top employee recognition software options include: Bonusly, Nectar, Guusto, and Kudos.

Close More Deals With the MBO Model

The MBO model has been used by countless companies to achieve organizational objectives. Your sales team can use it, too. Doing so may help your reps connect with more leads, close more deals, and improve customer satisfaction scores.

Of course, MBO isn't for everybody. Consider the pros and cons of this management technique before you implement it. You may be better off with a different strategy.

If you decide to move forward with MBO, use the four-step process outlined above. As long as you identify goals, monitor rep progress, recognize your team, and use top-rated technology, you should be able to build an MBO process that greatly improves your sales department.

Speaking of technology, have you tried Close yet? Our CRM software was specifically designed for sales teams. As such, it has all of the features your reps need to close deals.

Sign up for a free 14-day trial of Close today to see if it's the right CRM for your organization!