The Art and Science of Target Setting

Description

The recent economic crisis and the collapse of many financial institutions stand as living proof of the dangers of overly ambitious targets coupled with fat bonuses. Targets, at their best, can motivate people to succeed; at their worst, they induce employees to engage in dysfunctional behavior, leading to detrimental outcomes like those recently witnessed. How can companies get it right? The authors studied target-setting practices involving sales managers, account managers and business development professionals in the U.K. over a two-year period. Their research turned up a litany of failures: unrealistic goals, overemphasis on financials, lack of coordination, bad communication, all adding up to dissatisfaction and poor performance. Based on these findings, the authors identify the key moderators that influence people’s behavior and condition favorable outcomes when it comes to formulating targets, incentive schemes and performance measures. They then suggest a 10-step process to improve the whole way in which performance targets are set. It takes some work, they say, but if well designed, targets can resume their original purpose: to drive superior performance.

Keywords

compensation dysfunctional behavior fairness forecast incentive motivation objective sales representative sales team target