Management by Objectives (MBO) Lecture #16 Lecture #16

MBO Example Sales Representative Pat Sales Representative Pat

Pats Salary Actual Salary in 06: $35,000 Actual Salary in 06: $35,000 Desired Salary in 07: $40,000 Desired Salary in 07: $40,000 $5,000 increase in income is a 14% increase $5,000 increase in income is a 14% increase

Pats 06 Sales Activities Annual (Weekly) Annual (Weekly) 1887 Selling Calls (38/week) 1887 Selling Calls (38/week) 1348 Sales Presentations (27) 1348 Sales Presentations (27) 642 Closes (13) 642 Closes (13) 107 Sales(2.14) 107 Sales(2.14)

Definitions of Terms Selling Calls Selling Calls Sales Presentations Sales Presentations Closes Closes Sales Sales

Selling Calls Face to face introduction Face to face introduction Attempt to secure an appointment for a Sales Presentation Attempt to secure an appointment for a Sales Presentation

Sales Presentation Sit down interview to present companys products/services Sit down interview to present companys products/services Could be fact find, or an attempt to sell Could be fact find, or an attempt to sell

Close Ask the prospect to buy Ask the prospect to buy

Sale A contract is signed A contract is signed

Pats 06 Sales Activities Annual (Weekly) Annual (Weekly) 1887 Selling Calls (38/week) 1887 Selling Calls (38/week) 1348 Sales Presentations (27) 1348 Sales Presentations (27) 642 Closes (13) 642 Closes (13) 107 Sales (2.14) 107 Sales (2.14)

Pats 06 Sales Results $640,000 in sales $640,000 in sales Average of $6,000 per sale Average of $6,000 per sale $35,000 in commission $35,000 in commission

First Option To increase commission by 14%, Pat could increase sales activities by 14% To increase commission by 14%, Pat could increase sales activities by 14%

Pats 07 Activity Plan Annual(Weekly) Annual(Weekly) 2152 Selling Calls (43) 2152 Selling Calls (43) 1537 Sales Presentations (31) 1537 Sales Presentations (31) 732 Closes (15) 732 Closes (15) 122 Sales (2.44) 122 Sales (2.44)

Pats 07 Plan Results $732,000 in sales $732,000 in sales Average of $6,000 in sales Average of $6,000 in sales $40,000 in commission $40,000 in commission

Second Option Examine Pats performance record for possible improvement in sales technique Examine Pats performance record for possible improvement in sales technique

Weekly Ratio Analysis 38 – 27 – 13 – 2.14 (Pats 06) 38 – 27 – 13 – 2.14 (Pats 06) 43 – 31 – 15 – 2.44 (Pats 07) 43 – 31 – 15 – 2.44 (Pats 07) 30 – 20 – 10 – 2 (Company Std) 30 – 20 – 10 – 2 (Company Std)

Compare Actual to Std Ratio of Selling Calls to Sales Presentations Ratio of Selling Calls to Sales Presentations Ratio of Sales Presentations to Closes Ratio of Sales Presentations to Closes Ratio of Closes to Sales Ratio of Closes to Sales

Selling Calls: Sales Presentations 06 Actual: 38 –> 27 ( 1 ->.71) 06 Actual: 38 –> 27 ( 1 ->.71) Standard: 30 –> 20 (1 ->.667) Standard: 30 –> 20 (1 ->.667) Actual is above Standard Actual is above Standard Not a deficient area for Pat Not a deficient area for Pat

Sales Presentations: Closes 06 Actual: 27 -> 13 (1 ->.48) 06 Actual: 27 -> 13 (1 ->.48) Standard: 20 -> 10 (1 ->.5) Standard: 20 -> 10 (1 ->.5) Actual is just about at Standard Actual is just about at Standard Not a deficient area for Pat Not a deficient area for Pat

Closes: Sales 06 Actual: 13 -> 2.14 (1 ->.16) 06 Actual: 13 -> 2.14 (1 ->.16) Standard: 10 -> 2 (1 ->.2) Standard: 10 -> 2 (1 ->.2) Actual is below standard Actual is below standard An area for improvement for Pat An area for improvement for Pat

If Up to Standard… 06 Sales would have been more 06 Sales would have been more Actual: 642 Closes -> 107 Sales Actual: 642 Closes -> 107 Sales At Std: 642 Closes -> 128 Sales At Std: 642 Closes -> 128 Sales

If Up to Standard… 128 Sales at $6,000 each sale results in a total of $768,000 in sales, which yields about $42,400 in commission 128 Sales at $6,000 each sale results in a total of $768,000 in sales, which yields about $42,400 in commission

Third Option Increase size of average sale Increase size of average sale Sell bigger ticket items or services Sell bigger ticket items or services

Fourth Option Sell higher commission items or services Sell higher commission items or services

MBO Highlights Desired salary in 07 was Pats input, not the sales managers Desired salary in 07 was Pats input, not the sales managers Getting to that goal of $40,000 was achieved by Pat and sales manager working together, using Pats performance data Getting to that goal of $40,000 was achieved by Pat and sales manager working together, using Pats performance data