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For many people, when their thoughts wander to the riveting topic of target setting, SMART objectives spring to mind.
For the sake of a refresher; SMART objectives stand for:
While this means of setting objectives has it's place, it's important to delve a little bit further into the best way to set targets for your organisation.
So, what's the deal with this target setting malarky? Why is it important? Why does your business have them in the first place?
In all honesty, the motivations for target setting are vast, take your pick.
First and foremost, if you fancy your business as being a good one, the chances are you're looking to grow, improve, and be more profitable. Target setting is the ultimate measurement of your success relative to such goals.
For staff, targets can only be a positive thing.
Based on all of the above, we can safely assume that target setting is a good thing to do. The benefits are numerous. But how do we actually set targets? What form do they take?
The first step you should be taking in setting performance targets is to reflect on your current position before indicating what you subsequently want to achieve.
This could involve the analysis of your company's historical data. Alternatively, you may opt to use data from other entities operating within your market as a means of benchmarking what your own targets should look like.
The second step is using your gathered data to help set the targets you want to achieve; as well as the time-frame in which you hope to achieve them.
It's important that when setting your targets you don't go overboard. Your targets should, by all means, be challenging, but they should also be realistic.
Aim for the moon. If you miss, you might hit a star.W. Clement Stone
Perhaps the most crucial aspect of target setting is that your targets need to be measurable. They need to be quantifiable. If they don't meet those criteria, you'll be wasting your time.
Time for some real talk. Once in a while, all of us have fallen foul of using vanity metrics.
Some even rely on them persistently.
You know, the type who stands brazen as brass in the boardroom, bellowing out a stream of numbers attached to phrases such as 'sessions', 'time on page', or 'bounce rate'.
All the while puffing their chest out with pride.
All the while failing to realise not one soul in that boardroom sees any value in what they're saying, after all, they aren't actionable insights.
It's okay, these things happen.
The point is, when it comes to target setting, vanity metrics just won't cut it.
You need to take your numbers a little bit further, producing something that actually holds value and tells people something. Something they can actually work with.
Another commonly made mistake within this aspect of target setting is a distinction between a target and a KPI, or lack thereof.
To help clear this up, repeat after me:
"A KPI is not a target. They are not the same thing."
A KPI is linked to your top-level goals as a business, forming the basis of eventually setting your targets.
Before moving to set the target though, you need to compliment your KPI with some form of measurement.
Finding that right measurement is where people tend to struggle, but it's an essential aspect of goal setting.
If you're still struggling to grasp the distinction between a KPI and a target, consider the very generic example seen below:
KPI: We need to increase our profits.
Target: We need to increase our profits by 10% month-on-month in Q4.
See the difference?
As a final point on what are metrics in target setting, the metrics you eventually adopt will fall into one of two categories. Leading indicators or lagging indicators.
Leading indicators will measure the activities your team should be performing as they strive towards meeting their targets.
Lagging indicators are altogether more reflective, measuring your overall outcomes against your targets.
To wrap this blog up, we’ll be taking a look at some examples of the sort of targets you may set for your own business and your employees, as well as the logic behind them.
Naturally, what your targets will look like will vary enormously from readers before and after you. So, we’ll try to keep things as broadly applicable as we can, while still being useful.
Increasing the % of sales accounted for by returning customers by 20% in 2020.
It’s universally accepted that acquiring new customers is a significantly more expensive exercise then getting existing ones to make repeat purchases.
You may find that repeat purchases are lower than expected and that you need to spend time looking at your post-purchase touchpoint with those consumers. Or, perhaps, you'll look to increase sales from existing customers as a means of reaching your overall sales targets for the year.
Reduce the number of customer complaints per purchase to 3% in Q1.
The fact that you have a target addressing the need to reduce complaints hints at a serious issue, whether that be with the product or service that you’re offering, or in your customer service is for you to summise.
Half the number of items returned due to product defects in 2020.
Product defects are a serious concern and can tarnish your brand image. In the event of product defects, you’ll find that affected customers may not return to part with their hard-earned cash for your benefit. Instead, they’ll go to one of your competitors.
So, to summarise, target setting is an absolutely crucial aspect of moving your company forward. The benefits of target setting are numerous, but setting the targets themselves can be somewhat confusing. Confusion arises from the measurements being used within as well as the distinction betweent arets and KPI's, taking these into consideration is absolutely crucial to get your set taregets right.
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