9 Performance Target Strategies
This topic flows directly from current experiences as a business mentor in challenging times.
Check with The Catholic CEO for further information. Been there; done that.
CAN YOU SET REAL PERFORMANCE TARGETS?
Yes you can. Few try hard enough.
1. Define the three top proofs, indicators, or measures of your business success.
- List the three top key performance indicators (KPI) that prove the business is succeeding/prospering/growing. Examples: Sales growth. Sales growth in the top three vertical markets. Margin. Market penetration (e.g. percentage of the market held, number of customers, percentage or number of customers “retained”, by period). Market capitalization (or equivalent “per share value” in non-publicly-traded businesses). EBITDA growth (Earnings before interest, taxes, depreciation, and amortization – sometimes simply called “earnings”). There are many more.
2. Construct QUANTITATIVE Measures/Indicators.
- Design quantitative measures of performance that you can actually measure – and that are rather simple to measure within a week or two of their performance. Don’t use measures that take a long time to count/report.
- Create an automatic reporting system of these three top quantitative indicators. Try not to create tedious manual measurement systems. Keep it simple. Keep the reporting mechanism simple. Keep the process short.
- Post the results. Develop an open book communications system. Use colour codes, figure charts (e.g. bar charts, pie charts, comparative charts, etc.) and other visuals.
- Talk about the results. Show staff that the measures are important. Praise and reward high performance. Act immediately on low performance. Announce responses immediately if you are off target.
- Consider using more sophisticated, creative measures – such as “twelve month trailing averages” that remove seasonality and give a different, more credible look into your business.
3. Measure results, not activities.
- Yes, you will need to develop better “activities” such as more cold calls, shorter calls, smaller lead time, etc. – but only if they lead to “results”.
4. Ensure “measurability”.
- Can it actually be measured objectively?
5. Ensure “relevance”.
- My mentor once said – the performance measures you choose reflect your priorities (Quote: That which is measured is delivered).
6. Select short-term periods.
- More frequent measurement and posting helps achieve goals because you have more opportunities to pivot/make changes.
7. Check for unintended consequences.
- Ensure what you are measuring doesn’t lead to undesirable behaviours/actions.
8. Regularly discuss the key indicators/results with staff.
- Ensure they know why you have selected such measures. Ensure they know how each indicator is measured.
9. Link compensation to performance.
ONE MORE THOUGHT: It is better to have a “reasonable, moderate” set of performance indicators today than to wait a year for “perfection”.