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Management by Objectives

(MBO)
 Lecture #16
MBO Example
 Sales Representative “Pat”
Pat’s Salary
 Actual Salary in ‘06: $35,000

 Desired Salary in ‘07: $40,000

 $5,000 increase in income is a 14%


increase
Pat’s ‘06 Sales Activities
 Annual (Weekly)

 1887 Selling Calls (38/week)


 1348 Sales Presentations (27)
 642 Closes (13)
 107 Sales (2.14)
Definitions of Terms
 Selling Calls
 Sales Presentations
 Closes
 Sales
Selling Calls
 Face to face introduction

 Attempt to secure an appointment for a


Sales Presentation
Sales Presentation
 Sit down interview to present company’s
products/services

 Could be fact find, or an attempt to sell


Close
 Ask the prospect to buy
Sale
 A contract is signed
Pat’s ‘06 Sales Activities
 Annual (Weekly)

 1887 Selling Calls (38/week)


 1348 Sales Presentations (27)
 642 Closes (13)
 107 Sales (2.14)
Pat’s ’06 Sales Results
 $640,000 in sales

 Average of $6,000 per sale

 $35,000 in commission
First Option
 To increase commission by 14%, Pat could
increase sales activities by 14%
Pat’s ’07 Activity Plan
 Annual (Weekly)

 2152 Selling Calls (43)


 1537 Sales Presentations (31)
 732 Closes (15)
 122 Sales (2.44)
Pat’s ’07 Plan Results
 $732,000 in sales

 Average of $6,000 in sales

 $40,000 in commission
Second Option
 Examine Pat’s performance record for
possible improvement in sales technique
Weekly Ratio Analysis
 38 – 27 – 13 – 2.14 (Pat’s ’06)

 43 – 31 – 15 – 2.44 (Pat’s ’07)

 30 – 20 – 10 – 2 (Company Std)
Compare Actual to Std
 Ratio of Selling Calls to Sales
Presentations

 Ratio of Sales Presentations to Closes

 Ratio of Closes to Sales


Selling Calls: Sales
Presentations
 ’06 Actual: 38 –> 27 ( 1 -> .71)

 Standard: 30 –> 20 (1 -> .667)

 Actual is above Standard

 Not a deficient area for Pat


Sales Presentations: Closes
 ’06 Actual: 27 -> 13 (1 -> .48)

 Standard: 20 -> 10 (1 -> .5)

 Actual is just about at Standard

 Not a deficient area for Pat


Closes: Sales
 ’06 Actual: 13 -> 2.14 (1 -> .16)

 Standard: 10 -> 2 (1 -> .2)

 Actual is below standard

 An area for improvement for Pat


If Up to Standard…
 ’06 Sales would have been more

 Actual: 642 Closes -> 107 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
Third Option
 Increase size of average sale

 Sell bigger ticket items or services


Fourth Option
 Sell higher commission items or services
MBO Highlights
 Desired salary in ’07 was Pat’s input, not
the sales manager’s

 Getting to that goal of $40,000 was


achieved by Pat and sales manager
working together, using Pat’s performance
data

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