A lot of people view target setting as a burden that should not be undertaken or allowed to form part of any organizational culture, while some other persons are of the view that it can only be allowed to be practiced in selected sector of the economy. In fact, employees of small businesses to be precise, consider target setting the prerogative of the banking sector.
Nevertheless, evidence from high performing organizations big or small show that target setting is for everybody both for small or corporate entities that desire to achieve meaningful advancement with their corporate or organizational goals.
Even at that, it got so negatively viewed that the lawmakers were beginning to propose regulations against target setting in corporate organizations without due consideration to the fact that without target setting, there could be no performance measurement.
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Closer home, a quick trip to some filling stations around the metropolis will reveal the importance of target setting as you would see pump attendants jostling to get most of the cars that are coming to refuel their vehicle. That is the beauty of target setting in an organisation.
The truth of the matter is that target setting according to performance measurement experts is a methodical process of measurement. For example, if an organization fails to express their organizational goals in the form of targets, there would be no indicator for the organization to itemise progress that is been made per time. They may not be able to identify in quick succession where the bad leg in the three-legged stool is situated on time, thereby, denying management ability to have a clarity on the organization’s growth trajectory.
To buttress this point, without target setting, there would be no key performance indicators (KPIs) which are the quantifiable measures that gauge a company’s performance against a set of targets, objectives, or industry peers. It is target setting that enables an organization to generate metrics or data to gauge how well a team performed against agreed standards
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While KPIs are important to business objectives because they keep objectives at the forefront of the decision-making process, target setting is the forerunner for any organization that is serious enough to consider having KPIs.
In this age of internet or things whereby a click of a button can cause a damage to organizations reputation or provide an opportunity, it is essential that business objectives are well communicated across an organization, so that, when people know and are responsible for their own KPIs, it helps to ensure that the business’s overarching goals become top of mind of everyone in the organisation and will be able to respond as and when necessary.
All things considered, I will state that running a small business without proper alignment of objectives that includes your organization’s aims, goals, or an end of action, or a strategic position to be attained or a purpose to be achieved within a timeframe will be dangerous at best. It is imperative that CEOs of businesses understand that setting organizational objectives which is usually cascaded into target setting for individual team members is critical.
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Interestingly, business objectives cascaded into team targets helps to track performance of an organisation. This is so because, the team members make up the organization and as a result, the individual measurable achievements when tallied together, forms the organizational achievement. It therefore means that, if an individual objective (without a target) is not measurable, it is not possible to know whether as an organization, you are on track to meet the organizational objective at project completion period.
At this point, permit me to quickly differentiate between goal setting and targeting setting. At organizational level, your goal as stated above is the overarching agenda for every member of staff of that organization. However, in view of the Peter and Paul principle, which states that for an employee to be successful in an organization, he or she must submit his/her ambition to that of the organization. Therefore, the goal of that employee is translated from the organizational goal into specified, minuscule, action related, realigned and time conscious targets.
Therefore, I can state that targets are shorter-term, practical routes to achieving organizational goals SMART goals.
For the young and geeky entrepreneurs, there are generally five key performance indicators that are of interest to every organization. These are areas that are said to be the vital organs in terms of driving organizational performances for shareholders and stakeholders. It includes the following.
Revenue growth – Revenue growth is one parameter used in determining whether an organisation is making profit or not. To drive revenue growth there are generally three windows, you can decide to focus on creating more revenue opportunities or reduce cost or a combination of the two.
Revenue per client – Most organisations have clients, and it is team members engineered clientele contribution that leads to overall increase in the number of clients ultimately leading to the overall revenue growth of an organisation.
Profit margin – The profit margin is the final bus stop; it is a hard parameter, as lots of people are unable to differentiate profit margin from gross profit which can give a wrong impression of the performance of an organisation.
Client retention rate – How many clients that you able to retain over a period is another KPIs that is critical. This is so, because the cost of attracting a new client is higher than the cost of retaining an old client.
Customer satisfaction – Customer’s satisfaction is difficult to measure, but client’s retention and how much profit that you can retain helps to determine customer satisfaction
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Another important concept that you may wish to note as you execute your organizational objectives or measure your team members key performance indicators resulting from your target setting is known as –Key Result Area (KRA)
The concept of Key Result Areas (KRAs) refers to a brief list of overall goals that guide how an individual does their job, or general achievement and progress goals for an organization or one of its divisions.
The difference between Key Result Area (KRA) and key Performance Indicator (KPI) is in what they measure. While KPIs measure how a system is functioning, KRAs measure the results from certain actions within a system. Examples of KPI is, the percentage of increment in the profit for a business, the pass-fail ratio of a school while example of KRA include the customer base, revenue, profits, employee attrition.
So, if you need a hand to get going, follow this 4-step approach to writing KPIs.
- Determine strategic objectives.
- Define success.
- Decide on measurement.
- Write your SMART KPIs.
Conclusively, to measure your KPIs, you must realize that it involves the use of the following metrics: surveys, questionnaires, interviews, sensor data collection, focus groups, automated machine data collection as well as collection of archival data.
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At G-Consulting, we are rooting for you, as we look forward to seeing you at the top.
Article by Godfrey Ajayi Sunday. Group Managing Director, Gconsulting International Services Ltd