When helping clients develop measures, or key performance indicators (KPIs), for their Balanced Scorecard or strategy management system, one of the most common questions I hear is: “What do we do about setting targets for our measures?”
And, as every good consultant knows, the answer is: “It depends.” It depends, for example, on how mature your measures are (Have you used them before and, therefore, have historical data?) or whether there are benchmarks you can use from similar organizations or an industry association. In some instances, you may not even want to set targets for the first year or so, that way you can collect baseline today to use to set future targets.
Regardless, if you are setting targets for your strategic measures, you want to set ambitious targets. There are several reasons for this. First, you want to challenge your organization. No one has ever achieved greatness (or, really-goodness) by planning to just do OK. Set high expectations across your organization and expect people to rise to the occasion. Outsized success requires outsized expectations.
Second, while you are using your measures to measure performance within your
organization, you should not be measuring performance strictly to come up with evidence for firing people. The primary reason should be to collect information about your organization’s performance so that when you have the smartest people in the room, you can analyze and discuss your performance and figure out ways to improve it in areas that need improvement.
Third, your strategic plan should not be set in stone. Set ambitious targets and if you find after a few months or quarters that you have been too ambitious, you can always scale the targets back. You may find that in some areas you were too ambitious, while not ambitious enough in others. Your organization should learn from its performance management system and feed that learning back in to improve overall performance.
What got to thinking about all of this target setting in the first place was what I heard at a recent client meeting where the CEO revealed the company’s targets for the coming year. He admitted that they were ambitious targets, but, he said, “we have ambitious goals for the coming years and I know the people in this room can make it happen.” It was a pretty good pep talk, at least I thought so.