MBO or “Management by Objective” is a process or system designed for supervisory managers in which a manager and his or her subordinate sit down and jointly set specific objectives to be accomplished within a set time frame and for which the subordinate is then held directly responsible. As a term, “Management by Objectives” was first used by Peter Drucker in 1954.
Benefits
- Gain greater commitment and desire to contribute from subordinates
- Gain better control and coordination toward goal accomplishment
- Gain an increased ability to help subordinates develop
Creating a comprehensive and cohesive MBO program includes:
- Alignment with regional Sales Objectives: Set MBOs to drive behavior towards key sales strategic initiative with an emphasis on growth
- Performance Oriented Goals: MBOs should drive current quarter and/or trending revenue achievements versus task-based objectives that are part of standard sales team role requirements
- Full Year Time Horizon: Eliminate the quarterly design burden on Sales Leadership & Sales Ops and allow for sales team communications early enough to be actionable and drive the desired behavior
- Simplicity & Consistency: Goals should be both easy to understand as well as easy to measure
- DSM empowerment: Framework where DSMs are empowered to assign MBOs to reflect territorial priorities
How is MBO related to Quota?
Annual Sales Quota:
Each Representative will be provided with his/her Annual Sales Quota(s) in USD within a reasonable time period from date of hire. Some Representatives may be assigned multiple Annual Sales Quotas to align with their coverage of various designated Territories.
Quarterly MBO:
Each Quarter, Representatives and Managers will receive communication about the specific objectives they will be responsible for in addition to their Quarterly Sales Quotas. Achievement of the MBO, as assessed at the end of the Quarter, will result in an MBO Bonus payment in an amount up to 10% of the Representative’s Base Commission target for such quarter.
If the Bonus was not achieved in a particular quarter, it will not be granted in a future quarter. If a Representative misses their MBO Bonus and the reason for such shortfall is due to circumstances beyond the Representative’s reasonable control, the MBO Bonus may be awarded in Illumina’s sole discretion. MBP Program Roles, Product Care Representatives/Managers, Field Marketing Representatives/Managers and Lead Generation Specialists/Managers are not eligible for MBOs.
Quarterly Bonus:
Some Representatives and Managers may be assigned a Quarterly Bonus in lieu of the Quarterly MBO Program outlined above. This quarterly bonus shall be calculated, considered earned, and subsequently paid at the end of each fiscal quarter to Representatives that have achieved quarterly Commissionable Sales above their Quarterly Quota.
For Representatives with multiple Annual Quotas, the Quarterly Bonus will be split across each product line in the same proportion as the Annual Base Commission as provided by their supervisor. The Quarterly Bonus shall equal 10% of the Representative’s Base Commission earned for such quarter. If a given Quarterly Bonus was not achieved in a particular quarter, it will not be granted in a future quarter even if Commissionable Sales at the end of a future fiscal quarter are above the applicable YTD Quota. If a Representative misses their Quarterly Quota and the reason for such short fall is due to circumstances beyond the Representative’s reasonable control, the Quarterly Bonus may be awarded in Illumina’s sole discretion.
Example
If a Sales Rep is on a standard plan with the MBO of 10% and they have a commission target of $100,000, they would be eligible for an extra $10,000 on the year which would be broken up into $2,500 per quarter. So they’d earn regular commissions and then could earn $2,500 each quarter on top if they hit the MBO goal. Many people miss the MBO and it doesn’t effect their commissions. If someone falls short on commissions, it means they get paid less than their target, but they still get their base salary.
Given the importance of P&L, the MBO for all eligible sales roles in Europe in 2024 is to achieve the Europe standard margin target.
The 2024 MBO target for Europe is to achieve $923M (77.3%) standard margin (both the SM$ and SM% need to be achieved).
This is an annual target and payout is expected to be either Jan or Feb 2025.
There is a menu of 3 quantitative metrics, as described in the table below, which are applicable for TAMs, PAMs and their managers. Each individual has 2 quantitative metrics which remain the same throughout the year, while each quarter Managers can agree to a new target per metric.
- For TAMs, metric achievement is measured on territory level (i.e., 2 metrics per territory).
- For PAMs, metric achievement is measured on individual level (i.e., 2 metrics per PAM regardless of the number of territories).
Metrics 2 & 3 are team goals and are measured on district level. There is no rule or restriction regarding the selection of metrics, any combination is possible. For example, a TAM can either select 2 team goals (i.e., metrics 2-3) or a combination of individual and team goals.
In 2023, the Bluesheet gating qualitative metric was introduced as a pre-requisite for any pay-out to the quantitative metric attainment. For example, if the gating metric is unsuccessful, the pay-out will be 0% regardless of the results of the other metrics. This Bluesheet gating metric is not applicable to DSMs!
Lastly, AG and Human Sales Specialists as well as Technical Sales Specialists are part of the MBO plan, but they have their own individual goals created by their managers.
| # | Metric Name | Definition/Criteria | Validation Report Link |
|---|---|---|---|
| 1a | New Accounts Direct Sales |
*For mid quarter validations you can also use the “Active Accounts_Sales Metrics” report in Salesforce. | |
| 1b | New Accounts Indirect Sales |
| |
| 2 | Miseq Extend |
| |
| 3 | BeHungry |
1. Opportunity Name include 'Be Hungry', | |
| Gating Qualitative Metric | BlueSheet |
Note: Not applicable for DSMs |
MBP or “Management by Performance” is another type of Sales Incentives. This refers to departmental metrics which are established based on Sales Leadership’s priorities.
How is MBP related to Quota?
For certain Representatives, such as Regional Business Managers, Infectious Disease Specialists, Sequencing Specialists, RGH Specialists and Strategic Account Managers in EMEA, a MBP versus MBO is assigned as a subset of the total Commission Target (such as 60% Commissions/40% MBP for example) and no additional 10% MBO will be assigned.
One big difference to note is the MBO is an extra bonus and usually only the top sales reps are getting paid extra under the bonus although it does vary. Regarding the MBP, we expect sales reps to almost always get the full 100%. If they’re doing their job as asked, they should get it as this component is part of their target and not an additional amount. You can’t overachieve on the MBP either, so the commissions are the only part that let’s representatives under the MBP program earn above and beyond.
Example
If a Sales Representatives is on an MBP program under the 60/40 setup and they have a commission target of $100000, this means that $60000 can be earned through regular commissions on sales and then they receive the other $40000 based on achieving certain goals outlined by their manager. If the representative falls short on commissions, they just get paid less on that component and if they don’t hit all the MBP goals they might earn less than 100% of that portion as well.
Process
Sales Ops Analyst collects the MVP quarterly results by the Managers and submits to the Commissions Team via SNOW Ticket according to the communicated deadlines by them.
More details can be found here
