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How To Set The Right Performance Targets: A Ten Step Target Setting Tool

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132 views6 pages

How To Set The Right Performance Targets: A Ten Step Target Setting Tool

Uploaded by

Tarek Saafan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CGMA TOOLs

How to set the right


performance targets:
a ten step target
setting tool
How to set the right
performance targets: a ten
step target setting tool
Targets are frequently used as a motivational 1. Review stakeholder expectations: You need
technique. Founded on well established theories of to ask “who are our stakeholders?” and “what do
achievement motivation, targets that are specific and they expect from us?” This will determine the
perceived as achievable can help to focus managerial critical areas your organisation needs to address
action, encourage people to succeed and drive in order to be perceived as successful.
superior performance.
2. Strategic objectives clarification/ selection:
But setting the right targets is tricky and has become Once the stakeholders’ expectations are
a real issue for many organisations. identified, you need to express these as strategic
objectives. Strategic objectives are clear
The target-setting tool presented here is based statements of what the organisation needs to
on research by Professor Mike Bourne and Dr achieve. They must be few in number and should
Monica Franco-Santos at the Centre of Business address the different stakeholders’ requirements.
Performance, Cranfield School of Management and
was adapted from The impact of performance targets on 3. Success map: A success map is a visual tool
behaviours: a close look at sales force contexts, CIMA/ that shows how lower level objectives link to
Cranfield School of Management, 2009. higher level strategic objectives. It is a powerful
communication tool that explains “what” is to
Based on a two year study and interviews with be achieved and “why”. It also shows where each
nearly 100 sales people, the Cranfield School of part of the organisation contributes to achieving
Management identified the common barriers to these goals.
setting effective targets, and have developed a ten-
step tool to help improve the target setting process. 4. Objectives prioritisation: Most companies
try to achieve too much. It is much better to
Common target setting issues prioritise and deliver fewer objectives than fail to
deliver on too wide a range of goals. The focus
There are three common issues that undermine the
will help employees too as they will be very clear
effectiveness of targets. These are:
about what is important in the coming period.
• The forecast was mainly based on past
5. Operationalisation: This means designing
performance so people do not over achieve as
appropriate performance measures. How you
over achievement will make the next year’s target
define the measure will drive behaviour. So
much harder.
KPIs must reflect the organisation’s goals and
• Some targets are based on the wrong encourage the right behaviour from those
performance measures which is often referred to responsible for delivering the goals.
as “hitting the target and missing the point.”
6. Data collection: This step is often overlooked.
• Targets were ‘given’ to the sales people and no You need to collect timely and relatively
ownership was created. accurate information as a basis for setting your
targets. Data is never perfect, but it does have
This target-setting tool will help you better to be consistent and reliable enough to be fit for
understand and implement sales targets. It is divided purpose.
into ten steps and presented in the form of a wheel to
illustrate its cyclical nature. (see page 3)

2 How to set the right performance targets: a ten step target setting tool
Ten steps of improvement

2. Strategic
objectives
clarification/
1. Review
selection 3. Success
stakeholder
expectations map

10. Action
plan discussion 4.Objectives
and agreement prioritisation

Target-setting
9. Action
process 5.Operationalisation
plan design (measurement)

8. Set targets 6.Data


7. Data collection
analysis
(forecast,
variation)

Continuous monitoring

7. Data analysis: This is fundamental. You have 9. Action plan design: An action plan is required
to draw on your knowledge of the past and of covering all the projects and changes to the
the future to project what is going to happen. organisation that are needed to ensure the target
You also have to analyse the capability of is reached. This may include training, new
your processes. Are the processes capable of processes, new IT systems or ways of working
delivering the forecast? Most companies forecast, with your customers.
but fewer reassess their capabilities.
10. Action plan discussion and agreement:
8. Set targets: Based on the previous steps, this The plan must be communicated to staff. The
is the point you set the target. Judgement is communication has to be two way and done
required and you need to assess the risk of regularly. Regular staff meetings where the
getting the target wrong. This is also where most objectives are restated, goals outlined and
organisations stop, but this is not the end of the progress discussed is a good format. Sending out
process. the annual targets by email is not!

3
4 How to set the right performance targets: a ten step target setting tool
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May 2012

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