How to set useful targets for your business
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.
Key performance indicators (KPIs), targets and business strategy
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 KPIs 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 KPIs best capture the dynamics in the market.
Setting SMART targets
It's a familiar acronym, but a very useful one - your targets should be SMART - specific, measurable, achievable, realistic and time-bound:
• Using KPIs ensures your targets will meet the first two criteria, as all KPIs should, by definition, be specific and measurable.
• Achievable - you need to set ambitious targets that will motivate and inspire your employees, but if you set the bar too high you risk deflating and discouraging them instead. Look back at your performance data for recent 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 the people who will have to reach them. Make sure you only ask for performance improvements in areas that 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.
Assigning responsibility and resources
Once you have identified the targets based on your KPIs 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 your KPI targets should be concrete and clearly owned by a department or individual.
Hitting your targets is unlikely to be a cost-free process, so be ready to make the necessary resources available when needed. Also, undertake regular reviews to assist with motivation and to make changes if the progress made isn't as expected.
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