Written by our mentor Rod Solomons.
It is just a small step from measuring your performance to the much more dynamic process of driving up performance levels across your business. This involves setting performance targets in the key areas that drive your business performance.
Performance targets are a powerful management tool that can help you deliver the kind of strategic changes that many growing businesses need to make. The top-level objectives of your strategic plan can be implemented through departmental goals, and setting targets based on KPI’s (key performance indicators) is an ideal way of doing this.
For example, a company seeking to expand on the basis of its product design capabilities might target year-on- year increases in the number of patents it secures, of new products it launches, or of its licensing income. The specifics will depend on which KPI’s best capture the dynamics in the market.
Setting SMART targets. This is a familiar acronym to many but a very useful one: –
– Using KPI’s ensures your targets meet the first 2 criteria, as all KPI’s
by definition should be specific and measurable.
– Achievable – you need to set ambitious targets that will motivate and inspire yourself and your employees, but if you set the bar too high you risk deflating and discouraging them instead. Look back at your performance data for the past couple of years to get a sense of what kind of performance boosts you’ve seen before. This will give you a sense of what is feasible.
– Realistic – setting realistic targets means being fair on yourself and any employees who have to reach them. Make sure you only aim for performance improvements in areas that you and your staff can actually influence.
– Time-bound – people’s progress towards a goal will be more rapid if they have a clear sense of the deadlines against which their progress will be assessed.
Once you have identified the targets based on your KPI’s that you believe will deliver the strategic growth you’re aiming for, make sure you follow through by assigning clear responsibility for delivering each of them. It is fine for your top-level strategic objectives to be abstract and business-wide, but all of your KPI targets must be concrete and clearly understood and owned by you and by your employees.
Hitting your targets may not be cost-free so be ready to make the necessary resources available as and when required. And undertake regular reviews to assist with motivation and to make any changes if the progress made isn’t quite as expected.