Are you using targets wisely?
The end of the year is fast approaching and many businesses will be sitting down to set targets for next year. If you are doing the same as last year stop and think to yourself if the way you set targets is serving you well.
An often-used strategy by those in management and leadership roles is the setting of targets to improve performance. In this article I would like to give my view on why over the last 20 years this has become a bad habit. An excuse for poor leadership skills as it focuses effort on the wrong targets. I will explain how setting the wrong kind of target can be debilitating for an individual and a business and explain that there is another way. One, where people motivate themselves because they want to achieve, not because they are afraid not to. It’s a scenario where people achieve more, contribute more and take responsibility for their actions.
In most cases staff love to do well, seldom do they start a job and say I am going to do as little as possible. If they do then you have employed the wrong people. People tend to reduce performance over time purely because they have become disillusioned and no longer interested because you the manager or leader in the business has not created the right environment for them to succeed.
Targets are mostly used as a way to motivate people to do better and to do more. Targets create a measure by which a business can reward success and more often highlight failure. It is often overlooked that targets generate fear, poor behaviour, and negative energy that is perceived as a lack of trust in people. They are often set by those without the creativity to motivate people by any other means often because as managers they just don’t know another way.
Targets are mostly driven by history; management will look at the previous couple of year’s performance, take into account external factors and then set the target for the following year. That target will typically be a revenue or performance target and in most cases is somewhere between 10% and 20% up on the previous years number.
I remember being a young salesman and getting my new target for the year following a brilliant years performance. My reward was a 25% increase in my target, sure my bonus was bigger and I could earn more money but the target was like putting a big weight around my neck. I started the year full of enthusiasm and energy, had a pipeline as long as your arm much of which never materialized. I realised later that my target was driving my behaviour and as I was so desperate to hit my number to make the big bonus I was in push mode with the clients and drove most of them away. Most of us don’t like to be sold to. It ended up in me missing my target and having a really bad year, I left soon after.
The fear of course is that if you don’t have targets then the staff won’t work hard; this is what I call a lazy management technique. Trying to motivate staff and improve performance with targets does little more than add additional stress and pressure on the individual and is in my opinion is counter productive. It will result in more management time being taken up micro managing staff, fear of failure in the staff and fear of failure in the manager.
Be under no illusion if you have someone who is not performing to the best of their ability it is a direct reflection of your ability to manage and lead them.
The question therefore is how do we break this bad habit, how do we use targets as a constructive thing rather than a destructive thing?
The answer is to make the targets a source based not outcome based.
To use an example a few years ago I was approached by the MD of a business as he had given his sales team of three new targets for the year and it had not gone down well. He asked me if I could help them accept their new targets.
Each sales person had a ￡1M revenue target the previous year; the new target was ￡1.2M each. Looking at last year’s performance where each one had just achieved their target the MD thought it would be a good motivation for them to step up. The truth was all three had struggled to hit target, calling in every favour to hit their bonus number. They were pleased to have achieved their bonus and now felt they were being penalized for doing so.
I asked the MD if I could work with them for a few hours and asked him to support the outcome of the meeting and what they would ask for as a result of the session, to which he agreed.
I started by asking them all to write down the following:
· What a perfect deal looks like?
· The revenue the perfect deal would generate?
· What a perfect client looks like?
· List the top five deals that matched those criteria from last year
Exercise done I asked to identify what occurred that enabled those deals to take place. I kept working them back in time asked, “what happened before that?” ……and “what happened before that?”. Eventually they came up with the answer that the originating activity that brought in their best deals from the previous year was two things, either a cup of coffee or a referral, with a referral being a cup of coffee as the next step in the process.
Note: see my articles on referrals:
I asked them to concentrate on the cup of coffee. How many prospect initial cup of coffee meetings lead to a deal closing. Their estimate was for every 5 they have 1 will turn into a deal. So as long as they are sat in front of the perfect kind of client they should have a 20% success rate.
I asked them how many cups of coffee they could have in a month; bearing in mind they won’t be able to do them all the time. They calculated that they could do three a day maybe four and would probably do so for three days a week. We took the lower number, did the maths taking into account holidays and they decided it was not unreasonable to have 432 coffees with new prospects a year. Working on their numbers that should mean just above 40 new clients per annum each. Working on the average deal size that would mean a revenue number of ￡2M each.
PAUSE
The room fell silent at this stage because they realised that this was in their own hands, they had the power to set up the cups of coffee and it was purely a numbers game. They were not going to be driven by an outcome but would be in control and be in a position to take control of their own schedule.
Now of course there are a number of points here that need to be in place for this to happen
a. They need to have an untapped market of sufficient size to work with
b. They need to know what a perfect client looks like
c. They need to be rewarded on the source not the outcome
The sales team went to the MD and said we will deliver ￡2M each (remember they have referrals to add to this as well) and wanted to be bonused on how many coffees they had in the month within a qualified criteria of prospect agreed with the MD.
The MD agreed (with a bit of encouragement from me) and as a result the level of activity in the sales team went through the roof. There was no more thought of a ￡1.2M target. The outcome a year later was that two of the sales people had achieved over ￡2M, one of them had left. The one that left was probably the weakest and was someone who needed direction, the MD was not upset as he now had more time to grow the business rather than manage the sales team.
This is one example, no matter what the line of business or role where you are trying to improve performance with targets be sure to set the right target, ones that are source based. Do this by keeping asked the question “What happened before that?” If possible get people to set their own targets you will be amazed at what people will achieve if they take ownership.
Also remember targets are not the only way of motivating people, good culture and enjoying the people and environment they work in will always trump targets as a motivational tool. Culture is the base upon which all success is built.