MBOs Demystified

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Certain roles in the company call for a bonus as part of the total compensation plan.  But what criteria should be used for determining the bonus payout?  Common choices include company-level, department-level, individual or some combination of these.  These are different from sales commission plans and are commonly called Management By Objectives (MBOs).

The original concept of the MBO was introduced by Peter Drucker decades ago.  And although the way MBO bonus plans are administered has evolved over time, it is still is an important part of many management systems today.  This article will explain the basic components of an MBO bonus plan and some tips for administering them.  I’ve also included an MBO template for you to use.

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