In this post we’ll discuss targets and their relationship with measures. A target is a desired level of performance. Its importance cannot be disputed, particularly when coupled with an actual performance level, or baseline. The difference between the actual and target is known as the gap. Therefore, the legitimacy of the gap depends on the validity of the target. Because the gap drives activity, and the allocation and expenditure of resources in organizations at every level, consideration must be given to the source of every target. A bad target can drive bad behavior and generate waste. An appropriate target can create a winning organization.
Sources of Targets
Because targets can be used to assess the effectiveness of strategies, people and processes, let’s review the types of targets from least useful to most useful.
- Whim – A target with no external or internal rationale for achievement.
- Previous best – A target based on a desire to be as good as you used to be. This type is referred to as “Faded Glory”.
- Rated capacity – A goal to achieve full utilization of resources. This type is based on your limitations, not aspirations.
- Industry certification standard – A Minimum Acceptable Requirement (MAR) to stay in business. This is also referred to as a “compliance standard”. Note: Compliance is not the same as excellence.
- Evidence-based Practice – Better than a MAR and compliance. Others have applied approaches which have enabled them to achieve performance levels exceeding compliance requirements.
- Management edict – A target based on Leadership knowledge of external forces and requirements. This is different than a “whim” because there is logic supporting the target. It is often used to drive innovation and create new approaches. This type is also called “Management Wisdom”.
- Validated Customer and Market Requirements – Considered the “Gold Standard”. They drive customer loyalty, penetration, and growth.
- Role-model Performance – The highest rated target in the six levels of the Baldrige Scoring Guidelines for Results. These targets are intended to drive market/industry dominance in all activities. This type of target-setting requires a relentless search for excellence.
One can argue about which type is best, but most (except #1) may have an appropriate role given the situation. The key for selection depends on the over-arching objective and how it is communicated, cascaded, and funded throughout the organization. Setting targets without understanding the capabilities of the organization is whimsical.
Targets and SMART Objectives
Once a target has been set, the right hands must be on deck to ensure achievement. Cascading the gap requires clarity and integrated measures so that efforts at all levels make measurable impact on the gap. SMART (Specific, Measurable, Achievable, Relevant, and Timebound) objectives are an effective way to do this. For example, let’s say the measure is “Annualized Percent Employee Retention”, the current performance level is 85%, the target is 92%, the target date is June 30, 2023, and the initiative is driven from Strategic Goal #2 – Increase Workforce Capacity. Then SMART can be applied as follows:
Specific – Annualized Percent Employee Retention (Title of measure or KPI)
Measurable – 85% (Current performance level)
Achievable – 92% (Target)
Relevant – Supports Strategic Goal #2 – Increase Workforce Capacity (Linkage to strategy)
Timebound – June 30, 2023.
This information can now be combined to create a SMART Objective: “Increase the annualized percent employee retention from 85% to 92% by June 30, 2023, in support of Strategic Goal #2 – Increase Workforce Capacity”. Such a statement is clear, unites stakeholders towards a common purpose, and facilitates the efficient use of resources.
Summary
It’s all about the gap. The right target drives integrated resource planning and the effective use of resources. Appropriate targets combined with meaningful measures and SMART Objectives are key for achieving performance excellence.