In order to be most effective, Key Performance Indicators (KPIs) require targets.
Aren’t KPIs and targets the same thing? They are not, but the confusion over this stems from people using the terms interchangeably. KPIs help organisations understand how well they are performing in relation to their strategic goals and objectives. First, you start with a strategic objective, then you decide how to measure it (your KPI) and then define a target for your KPI.
Let’s look at an example to illustrate the steps.
1. First, a strategic objective is defined to improve quality.
Improve quality = strategic objective
2. What is one way to measure your progress toward the strategic objective? You could reduce waste.
Reduce waste = KPI
3.Then, a target has to be established for the KPI.
Reduce waste by 10 percent by the Dec 2020 = target
Targets Must Be Specific
Considerable goal-setting research and target setting practice shows very clearly that your targets need to be specific and time-bound.
A target for your KPI helps measure where you are in relation to where you want to be.
Targets can be set as:
Targets should be defined relative to:
Targets should have a clear time frame:
When your targets are specific and tied to a timeline for completion, you remove any confusion or ambiguity. The people involved will know exactly where they are where they are heading.
Targets Should Be Realistic and Achievable
Targets should push your team and present a challenge or a stretch compared to current performance. Beware of stretching them too far, however, because if a target is considered unrealistic and too hard to achieve, your team won’t strive to achieve it. You also don’t want to make the target too easy because it won’t be taken seriously by your team and they won’t engage with the KPI.
The objective of any KPI is to be a mechanism for learning and delivering continuous performance improvement, so setting the right targets is critical to facilitating that outcome. Here are a few more tips to help set the right targets:
Setting the right targets for your organisation’s key performance indicators is essential for them to drive high performance and for your organisation to develop a corporate culture of learning, growth and empowerment
Bernard Marr is an internationally bestselling author, futurist, keynote speaker, and strategic advisor to companies and governments. He advises and coaches many of the worlds best-known organisations on strategy, digital transformation and business performance. LinkedIn has recently ranked Bernard as one of the top 5 business influencers in the world and the No 1 influencer in the UK. He has authored 16 best-selling books, is a frequent contributor to the World Economic Forum and writes a regular column for Forbes. Every day Bernard actively engages his almost 2 million social media followers and shares content that reaches millions of readers.