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Unlock the Benefits of Management by Objectives (MBO) with Comission

Are you looking for a way to boost employee motivation and improve overall company performance? Management by Objectives (MBO) combined with commission plans might just be the solution you’re seeking. This powerful duo can help align individual objectives with company goals, incentivize employee performance, and ultimately drive your organisation’s success. Let’s dive into the exciting world of MBO with commission plans and explore how this approach can transform your business.

Key Takeaways

Combine MBO and commission plans to motivate employees, align objectives with company goals, and boost performance.

Set individual goals and structures for a motivated sales team focused on achieving organizational objectives.

Monitor progress, provide feedback, and address potential drawbacks to successfully implement MBO with commission plans in your organization!

Understanding Commission Plans

Commission plans are incentive pay options that offer a lower base salary with the potential for greater earnings through commission, as well as annual bonuses. These plans are a part of performance management, as they motivate employees to achieve their objectives and contribute to the company’s success.

To create an effective commission plan, it should:

  • Be clear and easy to understand
  • Be directly tied to results and performance
  • Be combined with a base salary to ensure stability while incentivizing strong sales production.

There is a vast array of commission plans, such as:

  • Base rate only commission
  • Base salary plus commission
  • Draw against a commission
  • Gross commission
  • Tiered commission

These plans can be used as part of objectives management to align employee goals with company objectives and drive performance in various industries, including retail, hospitality, and finance.

Types of Commission Plans

The two types of commission plans that can motivate sales reps to achieve great results are discretionary and regulatory. Discretionary commission plans offer flexibility in rewarding employees based on their performance and other factors, such as bonus points for exceptional achievements. This flexibility allows employers to recognize and reward employees for their hard work and dedication.

On the other hand, regulatory commission plans:

  • Are predetermined by a plan or contract
  • Are governed by regulations and employment contracts
  • Help ensure reliable, safe, and economically efficient services to consumers while maintaining regulatory oversight and compliance
  • Can contribute to a higher employee satisfaction index, as employees feel they are working in a well-regulated and secure environment.

Setting Commission Rates

Motivating your team largely depends on setting appropriate commission rates. The complexity of the sales process can certainly influence commission rates. Generally, the more difficult the sales process, the higher the commission rates tend to be, as a more complex sales process requires more effort, skills, and expertise from the salesperson.

It’s important to reassess and adjust commission rates regularly to maintain their effectiveness and fairness. Regularly reviewing and adjusting commission rates can ensure that your employees continue to receive a fair and motivating bonus for their hard work and dedication. By making necessary adjustments, you can maintain a positive sales culture and drive increased customer satisfaction.

The Connection between MBO and Commission Plans

Management by Objectives (MBO) is a strategic management model that fosters collaboration between management and employees, setting clear objectives to enhance organizational performance. The practice of management through MBO is a powerful tool for:

  • Connecting individual employee objectives with company goals
  • Enhancing collaboration and communication between management and employees
  • Providing a framework for performance evaluation and feedback
  • Aligning employee incentives with organizational objectives

MBO can be effectively combined with commission plans to incentivize performance and drive results, as suggested by the Harvard Business Review.

By involving employees in the goal-setting process and aligning their objectives with the company’s goals, MBO can lead to increased employee satisfaction and commitment. When employees are motivated by commission plans, it can lead to significant improvements in their overall health, skills, and job satisfaction.

Aligning Individual Objectives with Company Goals

Ensuring employees’ focus on results that benefit the organization requires the alignment of individual objectives with company goals. To achieve this alignment, you should establish clear organizational goals, ensure leadership is on board, and support employees in achieving their goals. By setting clear company objectives and creating individual objectives that align with those goals, you can create a cohesive and motivating environment for your employees.

When employees understand how their personal objectives contribute to the company’s overall success, they are more likely to be motivated and committed to achieving them. This sense of ownership and accountability can lead to improved performance, ultimately benefiting the entire organization.

Incentivizing Employees through Commission Plans

Commission plans can be a highly effective way to incentivize employees to achieve their objectives and contribute to the company’s success. By tying their compensation to their performance, employees are motivated to achieve their objectives and strive for higher earnings potential. This creates a sense of ownership and accountability, motivating them to do their best work.

To maximize employee engagement and motivation with commission plans, consider incorporating the following strategies to increase worker satisfaction:

  • Implement clear and simple plans
  • Align goals and values
  • Offer individual and team incentives
  • Maintain regular communication
  • Recognize performance
  • Continuously improve the plan

Not only can commission plans have a positive psychological impact on employees’ work motivation, but there are also many creative ways to structure commission plans to make them even more effective.

Implementing MBO with Commission Plans in Your Organization

Successful implementation of MBO with commission plans in your organization involves defining clear organizational objectives, setting individual goals, and tracking progress. By following these steps, you can create a motivating environment for your employees and drive improved performance across your organization.

Continuous monitoring of employee performance is key in MBO to maximize the effectiveness of managers and ensure that employees are staying on track to reach their objectives. Providing regular feedback and coaching to employees can help them improve their performance and achieve their objectives, promoting both individual and organizational success.

Defining Organizational Objectives

A unified direction for employees can be provided by clearly defining organizational objectives. By establishing clear company goals and sharing them with employees, you create a foundation for success in implementing MBO with commission plans.

A clear understanding of organizational objectives allows employees to:

  • Focus their efforts on achieving specific goals
  • Contribute to the company’s overall success
  • Work together to drive the organization forward
  • Improve performance and productivity
  • Setting individual goals and commission structures

After defining your organizational objectives, you should establish individual goals and commission structures that align with those objectives. By setting realistic goals and establishing clear commission structures, you can create a motivated sales team that is focused on achieving their objectives and contributing to the company’s success, ultimately leading to higher customer satisfaction.

Commission structures should be designed to incentivize employees to achieve their individual goals while also promoting collaboration and team success. By designing a commission structure that rewards both individual and team achievements, you can create an environment where employees are motivated to work together to reach shared objectives.

Monitoring Progress and Providing Feedback

To keep employees on track and allow them to adjust their efforts as needed, it’s crucial to monitor employee progress and provide feedback regularly. By keeping a close eye on employee performance and offering constructive feedback, you can help your team members overcome obstacles and continue working towards their goals.

In addition to monitoring progress, providing coaching and support can help employees improve their performance and achieve their objectives. This ongoing support can include:

  • Regular check-ins and feedback sessions
  • Training and development opportunities
  • Clear communication of expectations and goals
  • Recognition and rewards for achievements

This support not only promotes individual growth for both the employee and team member but also contributes to the overall success of the entire company through effective human resources management.

Pros and Cons of MBO with Commission Plans

Before implementing MBO with commission plans, organizations should weigh both its benefits and drawbacks. On the one hand, this approach can lead to increased employee motivation, improved performance, and better alignment between individual and company goals. However, potential drawbacks may include an overemphasis on goal-setting, increased pressure on employees, and potential competition between team members.

By weighing the pros and cons, organizations can determine whether MBO with commission plans is the right approach for their unique needs. With careful planning and consideration, it is possible to address potential drawbacks and customize the MBO with commission plans to fit the organization’s specific goals and challenges


MBO with commission plans can offer a range of benefits for organizations, including increased employee motivation, improved performance, and better alignment between individual and company goals. When employees are motivated by commission plans, it can lead to significant improvements in their overall health, skills, and job satisfaction.

Additionally, MBO with commission plans can foster a shared purpose among employees and promote greater collaboration and teamwork. By aligning individual objectives with company goals, employees can better understand their role in the organization’s success and work together towards a common goal.


While there are many benefits to implementing MBO with commission plans, potential drawbacks should also be considered. Overemphasis on goal-setting can lead to employees prioritizing short-term objectives at the expense of long-term strategic planning.

Increased pressure on employees to achieve their goals can also result in a competitive environment, potentially hindering collaboration between team members. To address these challenges, organizations should carefully balance goal-setting with long-term planning and foster an environment that encourages teamwork and collaboration.

Real-world Examples of MBO with Commission Plans

Real-world examples of MBO with commission plans demonstrate their effectiveness in various industries and settings. By setting specific sales objectives for sales teams and incentivizing them with commission payments based on the achievement of those objectives, organizations can drive sales and revenue growth.

For instance, in industries such as retail, hospitality, and finance, MBO with commission plans has been proven to boost employee satisfaction and maximize sales performance. These inspiring examples showcase the potential of MBO with commission plans in driving organizational performance and employee motivation.

Overcoming Common Challenges in Implementing MBO with Commission Plans

Organizations can overcome common challenges in implementing MBO with commission plans by:

  • Addressing potential drawbacks
  • Tailoring the approach to meet their specific needs
  • Ensuring transparency and fairness in the implementation process
  • Fostering a culture of open communication and clear expectations


In conclusion, Management by Objectives with commission plans offers a powerful combination for boosting employee motivation, aligning individual objectives with company goals, and driving organizational success. By carefully considering the benefits and drawbacks, customizing the approach to fit unique organizational needs, and addressing common challenges, businesses can unlock the full potential of MBO with commission plans and achieve remarkable results.

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