6 simple steps to setting successful targets

Targets help focus attention towards the outcomes that matter most. I’ve written this post from an organizational perspective, but you can also apply these ideas to personal goals. Clear, measurable targets are a valuable tool for improving individual and organizational performance. Nebulous, fuzzy targets cause unnecessary work and stress. Reducing ambiguity takes some extra work, but will produce more meaningful and effective results in the long run.

Archery targets

photo credit:Marcin Bajer via flickr cc

Well-constructed targets have the following six elements:

1. The Axes

If you draw your target as a graph, the horizontal axis represents time, and the vertical axis describes the measurement unit for your target.

Horizontal axis = time. Vertical axis = units.

Horizontal axis = time. Vertical axis = units (click to enlarge).

All targets need a timeframe to describe when the desired result must be achieved.

The units can be just about anything that makes sense, but it must be measurable. Whether it’s units produced, revenue earned, transactions processed, percent change or hours saved, the end goal must be quantifiable.

2. The number

This one is straightforward. The target number can be absolute (eg. $3m net profit after tax) or relative (eg. 2% fewer defects than last year). Target ranges can be useful when there is little historical data to inform the process (eg. launch 3 to 5 new products this year).

The target number.

The target number (click to enlarge).

3. An agreed starting point and data source

Since timing can play a big part in reaching a target, the starting point must be agreed. Commencing right before a peak in the business cycle can make results look spectacular without any intervention. Use historical data to help make allowances for such variations when setting targets.

Agreed data source and starting point.

Agreed data source and starting point (click to enlarge).

There shouldn’t be anything surprising so far, but this is where a lot of people stop. The job is only half done though. Stopping here means different people will be more likely to draw different conclusions about performance. There will also be more unexpected questions and performance discussions along the way.

While we might agree when measurement will begin, we haven’t agreed on the data source yet. It’s common to find different divisions of an organisation using different systems to track the same data. The numbers are always different, and each party asserts their number is the correct one. I’ve seen many examples where managers kept their own spreadsheets because they don’t trust the “official” source.

People have more confidence in data sources they are close to and are usually suspicious of others. Unless you’re explicit about the data source, you and your manager may choose different sources. This can lead to different interpretations of the outcome.

Make the vertical axis unit definition explicit too. For example, universities have several different ways of counting student numbers for different purposes. Unless you and your manager are counting the same thing the same way, your review may not go as well as you expect.

4. A lower tolerance

Though we visualize a straight line from the starting point to the target, in reality the result will bounce above and below this notional trajectory. Economic factors, seasonal variation, competitor behaviour, marketing and many other external factors influence this variation.

Lower tolerance.

Lower tolerance (click to enlarge).

Tolerance defines an acceptable level of variation. As long as the variation stays inside this limit, there’s no cause for concern. Without a lower tolerance, expect questions when the number dips below the trend line. The lower tolerance helps avoid unnecessary conversations about normal variation. If the number falls outside the tolerance, that’s the time for a discussion and to potentially take corrective action — particularly if this continues for several consecutive periods.

Like the target number, tolerance can be expressed as a percentage or absolute amount.

5. An upper tolerance

This works the same as the lower tolerance but deals with variation above the average trajectory.

Upper tolerance.

Upper tolerance (click to enlarge).

The upper and lower tolerance don’t need to be the same value (eg. a sales target may have an upper tolerance of 10% and a lower tolerance of 3%). You may also want to vary tolerances for specific time periods. For example, you might tighten a tolerance from 10% to 2% for a critical two-week period in your business cycle.

6. Regular review periods

The last element is to set regular review periods. Even if progress is tracking well, it provides an opportunity to assess the continued merit of this target, or just let your boss know how awesome you are.

Review periods.

Review periods (click to enlarge).

Closing remarks

Don’t set more than 5 to 7 targets at one time. Dividing your attention between many areas makes achieving real progress much more difficult. Having 25 different targets does nothing to help you decide what is more important when you’re faced with a choice about how to best use your time.

If you don’t have any specific targets in place, there’s three default targets you can use. Find something you can do better, faster or cheaper and build a target with the six elements described above.

Finally, I’d like to thank my colleague, David Gunsberg , for introducing me to this idea and for supporting me in sharing it more broadly.

Question: Do you have all these elements in place for your targets?

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