LeapComp - Sales Performance Management Blog

Here is a quick 5 step process outline that most companies use to manage MBOs (Management by Objectives), recapping some of the things I talked about in my last post.  As you will see, this is just common sense.

First, companies need to set corporate objectives.  Some goals are then set for the employees to meet those objectives.  The employee performance is then measured through the performance cycle, and evaluated at the end.  Finally, the employee is rewarded for his or her performance, and we repeat the cycle.

To elaborate on the comments I received in the last post, setting good objectives is very important; that’s at the core of MBOs.  Depending on the level of sophistication of the MBO solution, some help with objective setting, but most solutions simply help out to manage them.

A big aspect of MBO solutions is the performance monitoring.  Traditionally, that’s an activity performed at the end of a performance cycle.  With an MBO solution, managers can usually record some feedback about how employees performed on a certain milestone at anytime.  This way, the employee’s contribution is not forgotten when it’s time to evaluate them.

The performance evaluation is another big piece of MBO management. It is related to performance monitoring but records final observations.  For example, during the performance monitoring phase, a manager could record that an employee performed a certain task well, handled another sitation very well, and attained a certain objective.    The performance evaluation phase is when the manager will quantify and finalize how well an employee performed against his or her goals.  That’s usually recorded in form of a numeric scale (1 to 10) or a percentage.

Input from spreadsheets traditionally ends with performance evaluation.  However, MBO solution typically makes it easier to reward employees for their performance.  Many solutions allow managers to assign a number of dollars, within a certain range, for each set of objectives.

But managing the MBOs workflow is not the only benefit to look out for in a tech solution.  Through analytics and business intelligence tools, it should be possible to gather information about our MBOs.  This will help in determining how good the MBO program is (are we throwing money out of the window or is rewarding performance actually increasing it), determine the overall cost impact for a certain department or for the entire company (what if all employees exceed expectations), and more importantly, this insight should help us in setting better goals for low and high performers alike during the next MBO cycle.

Used properly, MBOs can become a powerful tool not only to incent employees, but to determine their performance over time and to better manage them.