Some ABCs of MBOs

Management can be messy, difficult, and hopefully rewarding. But one thing’s for sure – it’s not for wimps. You need to motivate, drive reliable results, and growth. One effective way to do this is by employing Management by Objectives, or MBOs.

MBOs are financial incentives that can be put in place quarterly, biannually, or annually to help encourage obtaining individual goals, some that would be met with or without the MBO in place, as well as “stretch goals.” An employee is formally recognized more than just once a year, boosting morale while they are (hopefully) meeting goals to boost loyalty.

A good (and motivational) MBO system starts with strategic planning by the group and aligning individual MBOs with both the organizational and departmental goals. These goals have to be obtainable, ones that the individual has control over achieving – not ones that are so dependent on uncontrollable factors (environmental or other individuals) that they actually serve to demoralize and create resentment.

Setting objectives for individual employees is a two-way street – make sure that employees have input and agree that while some may be difficult, they are obtainable. MBOs have to be measurable – doing a “good” job or being “thorough” are not measurable goals for a HR or payroll professional.

A good objective has one or more of the following: quantity, quality, time, or cost. For example, a goal for a premier payroll staffing firm in Ohio might be “Get five new clients in the next three months” instead of “Increase client base.” After three months, the company can easily tell if their objective has been completed.
Keep in mind that objectives aren’t independent – they should not only connect to company goals, but a percentage should be tied to team goals when appropriate.

Finally, remain flexible and be fair – if situations beyond an employee’s control make an MBO unreachable, establish a new one. MBOs are a portion of compensation that can be morale-building, NOT morale busting.


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