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Management by Objective

By 2017-07-18 MBO, Management by Objective

Management by Objectives is a management strategy which helps in alignment of broader corporate objectives by cascading down higher strategic goals to individual level goals depending on their function and expectations from their role. This approach was most prevalent for higher level roles and in industries with poor quality sales data or in cases where higher volatility in sales is observed. In the pharmaceutical industry until recently, this incentive plan type was primarily seen for managed markets roles and a few managerial roles. With the evolution of sales roles for specialty therapeutic areas, higher collaboration requirements with other teams and stringent compliance regulations, several companies are moving towards a combination of qualitative and quantitative sales performance measures to calculate incentives of their salesforce to account for changing business dynamics.


Management by Objective

Management by Objective

Management by Objectives is a management strategy which helps in alignment of broader corporate objectives by cascading down higher strategic goals to individual level goals depending on their function and expectations from their role. This approach was most prevalent for higher level roles and in industries with poor quality sales data or in cases where higher volatility in sales is observed. In the pharmaceutical industry until recently, this incentive plan type was primarily seen for managed markets roles and a few managerial roles. With the evolution of sales roles for specialty therapeutic areas, higher collaboration requirements with other teams and stringent compliance regulations, several companies are moving towards a combination of qualitative and quantitative sales performance measures to calculate incentives of their salesforce to account for changing business dynamics.

Key elements of MBO type plan design:

  • Mostly non-sales based performance measures
  • Pre-defined specific objectives with measurable results in a time bound environment
  • Rated by reporting manager and hence at times results in managing the manager instead of sales performance
  • Can be subjective
  • Historically more used for management positions
  • People often paid similar amounts
  • Higher administration burden for field management
  • Requires strong process governance measures

MBOs may not always be the best solution but there are specific situations when they become one of the key ways to drive right behaviour and retain top performers. Some of the issues highlighted above with MBOs can be easily accounted for in situations when they are designed, implemented and tracked properly. Effective MBO design, deployment and tracking is a systemic process and if adhered to the probability of the success of an MBO program increases manifold.

Some key aspects to work towards creating an effective MBO program:

  1. Provide structured guidelines to managers to help them set SMART (specific, measurable, achievable, results-oriented, and time-bound) objectives. Objectives should always be defined for metrics which are the best judge of employee’s performance
  2. Involve the team and help them understand how objectives can help the organization accomplish broader objectives and also link those to their individual success
  3. Work with individual team members to set and refine objectives which allow for employee buy-in and also helps in accounting for local geography needs
  4. Help them understand what kind of support structure is available to help them accomplish their individual objectives
    • Coaching and discussions with their immediate managers
    • Early feedback for course correction
    • Other support channels to reinforce their activities, events and messages
  5. Human behaviour is to stick to old habits and resist change even when they know it’s good for them as well as for the organization. In order to work around this psychology, consider developing more tactical goals where regular feedback is provided and additional support is given whenever required. These objectives should each have considerable weight so that employees don’t lose focus
  6. Define an effective measurement scale which can help differentiate performance based on refined set of objectives with tangible and measurable activity parameters.
  7. Automated and scalable system to create, manage, rate and approve objectives is important for the success of the MBO program. These systems allow for strong governance structure and provide an opportunity to management to keep track of the performance KPIs of an MBO program.

Most of the current IC solutions focus on quantitative performance measures while relying on error-prone manual adjustments to deal with qualitative measures. To address this problem, it is desirable to have access to a self-service Objectives Management module with the capability to allow for managing MBOs across large salesforces at different levels.

Standard Operating Procedures

SOP should describe the activities necessary to run the process successfully and deliver desired outputs. This document acts as a “How-to-Guide” to run the process on an ongoing basis. This document should include all the information including any additional manual checks (QCs) that needs to be done on intermediate and final outputs. There should be clear roles and responsibilities defined to avoid any confusion during process run. Required checks and balances should be worked in to ensure that any step is not overlooked by one individual. There should also be provision to track ongoing processes along with some capability to provide sign-offs and approvals. Key benefits of SOPs are:

  • Standardization of process with repeatable activities
  • Supports business continuity in cases of leaves/resignations
  • Reduces learning curve for new hires
  • Defines clear roles and responsibilities for successful delivery

Desired Software Features:

Create, manage, rate and approve objective sets across the salesforce at different levels Allow for mix-and-match of customized objective effective periods Built in self-evaluation and manager evaluation of objectives Conversational feature for discussing performance on an objective Allows employees to ask managers for guidance resulting in timely intervention in the form of on-job coaching Allows managers to provide ongoing feedback to the employees Multiple rating-systems support

  • Objective set duplication across reps and upload from excel support
  • Built-in auditing and compliance framework
  • Automated notifications of timelines and system activity
  • Detailed reporting dashboard to track completeness of objective management
  • User-friendly self-service module
  • Objective Period Customization
  • User Management
  • MBO Weight Management
  • MBO duplication from one participant to another
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