Performance targets can have a powerful impact on employee behaviors – this article considers their role, limitations, and things to be aware of when setting targets.
The role of performance targets
Part of the role of performance targets is to help motivate employees. Setting a target can help raise effort beyond what would typically be expected. The target provides a focus, illustrating the need to concentrate on the particular dimension.
Allows you to reward performance achievements
Another benefit of establishing targets is that it can provide a basis for you to reward attaining performance objectives. Attaining the targets can allow you to celebrate success within the firm.
Helps you keep focused
Another role of targets is to help concentrate decision-making within the firm around the objective. Having clear objectives can help ensure that decisions are made which prioritize reaching the targets.
The danger of performance targets
While performance targets can have an important role, there are also disadvantages associated with targets:
Impact on motivation if the targets are not reached
One of the dangers of targets is that they may result in disappointment (or frustration) should the target not be achieved. Rather than being able to celebrate the goal’s achievement, untainted goals have a danger that they result in a loss of morale.
Targets may be particularly likely to drive frustration if they are perceived to have never been attainable. Unless there are plausible ways for employees to meet the goals – and the path to increasing performance is in some ways in their control – it may feel like you are penalizing the employees for behavior that they don’t have control over.
Over-focus on the goal
Another danger of targets is that it can result in an over-focus on the goal, to the detriment of other parts of the employee’s work. While the goal may be achieved, the consequences of achieving it may outweigh the advantages, if for example there is a lack of focus on other areas of the business.
Dysfunctional or illegal behaviors encouraged
Another danger of targets is that it may incentivize behaviors that are dysfunctional to the firm (actively making the firm worse off in some way, even if the target is achieved), or at the extreme, encourage behaviors that are illegal in nature. Putting huge pressure on employees to achieve targets, without caring how they achieve those targets, can lead to employees devising ways for how to achieve the goals that are not in line with ethical standards.
Keeping performance balanced
Some approaches for keeping some balance in your performance targets include:
One approach to keeping performance balanced is to have multiple different goals, across a range of areas. This helps avoid the danger of becoming over-focused on any particular area.
Monitoring the impact of the goal
Another important component with strategic targets is monitoring the impact of the goal. If the goal seems to be driving behaviors that are not consistent with overall firm performance.
Possibility of stretch-goals
A final approach to avoiding some negative consequences associated with targets is to set a likely attainable goal, as well as a stretch goal. This can help ensure that at least part of the goal is attained, while also having a more ambitious stretch component to further elevate motivations.