Imagine this scenario: Your blog is up and running and this week you had 40 views and 3 comments. Given that the number of blog views is just one of the measures you have selected to help you manage the performance of your online community, should you celebrate? Does this result indicate progress? How do you know? The answer is that, as is, you don’t.
Many organizations put a lot of effort into collecting and reviewing actual performance results. While this is great (after all, some data is better than no data!), the truth is actual performance numbers without context are not as valuable as you may think. In performance management terms, the required context is provided by comparators - most commonly known as performance targets. When looking at actual performance results, a target is the secret ingredient that allows you to assess performance and answer such important questions as: Are we performing as expected? Are our results good? Are things improving? Since one of the key objectives of measurement includes helping you manage performance so that you can achieve specific business results, it's critical that you be able to answer important questions like these.
While setting targets may seem as easy as picking a number out of a hat, the fact is that establishing good performance targets is both an art and a science. Set the performance bar too low and watch people loose interest in what they are doing. Set the bar too high, people get frustrated and they stop trying to do their best because the situation feels impossible.
Here are the 4 basic approaches most frequently used to set performance targets:
1. Adopt pre-set budget targets - While these may or may not be stretch performance targets, pre-set budget targets allow you to maintain performance that aligns with and supports the objectives of the organization.
2. Collect historical performance data and then set incremental improvement targets - This approach establishes targets that require gradual but achievable improvements in existing performance levels. Because these types of targets are usually seen by employees/others as being attainable, they are generally motivating to work with.
3. Adopt dictated targets and performance benchmarks - Sometimes organizations have performance targets mandated to them. This frequently happens when you are required to meet obligations, contractual agreements, and/or regulatory standards. In cases where these targets require incremental performance improvement, organizations can usually adapt well. However, when mandated targets are stretch in nature (i.e. huge improvements in performance will be required to perform at target levels), problems can arise.
4. Collect historical performance data and set stretch targets - This often happens when you require performance levels that deliver to high stakeholder expectations, achieve best practice standards, and/or keep up with direct competitors. Stretch targets can be dangerous, particularly when there is a very big gap between current performance levels and target requirements. When setting stretch performance targets, organizations must be prepared to make investments that will support the achievement of these targets. Required investments include (but are not limited to) adding resources/people, streamlining work processes to find efficiencies/open up capacity, acquiring new tools/technology, providing training, and/or facilitating skills/capability development.
Sometimes you are lucky enough to be able to select your approach to setting performance targets. At other times, the approach is dictated to you. Whatever approach you end up taking to setting performance targets, the goal is to establish targets that relate to your strategy and will lead your organization in a direction that produces the results your strategy demands.
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