Targets, targets, bloody targets

I couldn't resist the opportunity to copy John Cleese and call this post "Targets, targets, bloody targets"

I've always had mixed feelings about targets and goal setting.

It's a fact that "Measurement drives behaviour".  If you measure something,  it will influence someone's behaviour.  The fact that measuring someone impacts their performance was popularised long before Schrödinger's Cat by the Victorians.

In order to set targets you need to need to have a measure - remember SMART objective setting (Specific Measurable, Realistic, Time-bound). Get your targets and your measures right and you can have a winning system. Or do you?

It is human nature to be lazy and play the system.  Having run a Service Management function for several years, I found people want to measure things which are easy to measure but probably irrelevant. The things which are important to the customer (and therefore the business) are often difficult to measure. For example in a shop, what is the measurement from entering the shop to being served and leaving the shop satisfied?  It's hard to measure this without influencing the measurements.

In these tough economic times, it's fashionable for companies to set ambitious targets (or not as the case may be) to be competitive.  Even here target setting is rarely straight-forward. Set a clearly unrealistic target and the person becomes demoralised and gives up trying - not good for the business. Make it too easy and others around may feel resentful that they are really trying hard and struggling with their stretch target whilst others are having an easy ride - end result is paying for mediocre results where the cost of the reward exceeds the value to the business.

Part of the problem is the association of financial reward, such as a bonus, with a target. As witnessed with the banking sector, greed kicks in and a culture of reward regardless of effort becomes established. The reward needs to reflect the results.

Sales seems to be one of those areas where on the surface it appears transparent and there is clear relationship between performance and reward. Make the sale - get the commission.  Even here the clarity of reward is far from clear.  If the commission is paid on revenue, then the salesperson may be rewarded for unprofitable deals.

Sales systems can lead to behaviour which is at odds with the goals of the companies and similarly companies can experience their own  "greed" and shoot themselves in the foot.

The obvious example with sales is where there is a cap (a limit).  If the sales person is rewarded up to a sales  limit of say £1M a percentage say 5% and anything above £1M is paid at 1%, there is a natural tendency for the person to stop selling above £1M in a year. Unless the company only has capacity to cope with £1M of sales, it doesn't make sense to cap sales. The behaviour of the sales person is therefore to stop selling and delay deals in the pipeline until the next year. Net result is the person achieves their sales quota early in the following year and is coasting for the remainder of the year. One of the reasons companies introduce these stupid caps is greed.  They don't want to pay their people "too" much.

So back to target setting.  The other problem with setting bold ambitious targets is when it comes to review time there is a tendency to look at non achievement as failure. Again utterly utterly stupid.

Let's illustrate this.

Normal target
100% achievement                            grow profit by 10%

Bold, ambitious target
100%                                               grow profit by 100%

With the ambitious target we "only" achieved growth of 50% so this is a fail.....

The challenge for businesses that want to be successful,  is to create bold ambitious targets that move the business forward.  Reward and celebrate achievements even if they don't quite meet the lofty ambitious goals.  Ensure there is a fair a equitable reward - to do this there needs to be culture that avoids greed on either side.