The science of setting performance targets
SOME PEOPLE LOVE TARGETS AND MANY PEOPLE HATE THEM. THEY WILL AVOID THEM, SET THEM LOW ENOUGH TO EASILY HIT THEM, AND MAKE EXCUSES WHEN THEY DON’T HIT THEM. HARDLY THE KIND OF BEHAVIOUR THAT DRIVES PERFORMANCE IMPROVEMENT! SO LET’S CHANGE THE ACT OF SETTING TARGETS AND INSPIRE AND COMPEL PEOPLE TO IMPROVE PERFORMANCE, WITHOUT FEAR OF FAILURE OR JUDGEMENT.
1. Frame targets as intentions, not expectations
When targets are framed as expectations, they encourage us to hit numbers. We all know that lots of dysfunctional things happen when people feel they are accountable to hit numbers beyond their current capability. Instead, we can frame targets as intentions, and focus accountability on the behaviours of monitoring and improving performance as a whole.
2. Measure the baseline first
The baseline for a measure or KPI is the current level of performance. Historic data is essential in establishing the baseline. The baseline is not the current month’s performance; it’s an average of recent performance, to take into account the natural variability of the measure. Knowing the baseline helps us make informed decisions about the size of improvement the target should be set for.
Own source revenue can vary as much as 50 per cent, so any one month will be meaningless. We need to establish the baseline from several month’s values. XmR charts do this brilliantly.
3. Set targets for capability, not effort
Targets that focus on hitting a number every month encourage behaviours that are usually unsustainable: working faster, longer, harder, or going for quick wins. Back off the effort, and performance declines. Instead targets should focus on process capability. Improve business process design once, and we get a sustainable increase in capability that doesn’t cost any further effort.
4. Give targets a timeframe
The best way to draw targets on a measure’s graph is as a point above the date by which we want to achieve it. When we set targets for capability (not effort), then we need to allow time between now and that target date, to do cause analysis, to test improvement ideas, and to implement the chosen solution.
5. Set a target trajectory
A target trajectory consists of two or three targets, of increasing difficulty, staged over time. The first is easily achievable, the second a little harder, and the third is a stretch. Sir Isaac Newton said, “If I have seen farther than others it is because I have stood on the shoulders of giants”. The idea with target trajectories is the same. We see the way to the next target from the vantage point we achieve through reaching the previous target.