An introduction to creating targets and KPIs for employees

When managed properly, targets and KPIs provide direction and motivation for employees. Here’s how to maximise their benefits.

The right employee targets can create real momentum for your business, boost motivation and provide a sense of direction among staff. This not only benefits sales and revenue, but also your capacity for growth.

An effective goal-setting strategy for staff can also support employee engagement. Gallup found that this translates to a 21 per cent increase in profitability, thanks to its positive impact on customer satisfaction and staff retention.

However, setting targets once a year isn’t enough to get maximum results. Businesses that set goals quarterly generate 31 per cent greater returns compared to those who stick to annual reviews. Those who did it more often had even greater results again.

This guide will look at some of the common mistakes business leaders make when creating targets and KPIs for employees and quick wins that will ensure your workforce is motivated to reach its full potential.

The next step will be to use our action plan to direct your change and improvement.

What factors affect your target-setting process?

Company objectives

For targets to generate the best responses, employees need to understand how they feed into the business and its wider objectives.

When staff can see how their work feeds directly into the success of the company as a whole, it’s easier to grasp the importance of the role they play and accountability is boosted.

It’s important to consider the wider goals of your business and make sure they’re reflected in individuals’ KPIs.

This may also prompt you to look at the ways you communicate company objectives to staff – make sure this is done clearly and openly, so employees understand what their targets are grounded in and why they’re important.

The need for measurable goals

Most traditional staff targets will be pegged on sales and revenue, which are easy to measure so long as a time frame has been clearly set out. However, when you’re looking at a more holistic set of targets to mirror business values and company objectives, things can get murky.

For instance, KPIs based on customer satisfaction are a little more fluid – it’s not a straightforward numbers game, unless you’re going to make a case for equating it directly and solely to sales figures. So, you’ll need to consider how to best collect that data, as well as how to measure it.

Any target needs an action plan for measurement that’s clearly laid out to the employee, so they know exactly how they will be assessed and what they need to do to meet their goal.

Five simple steps to creating effective targets for your employees

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Unconscious bias in the workplace

Bias and favouritism can come into play when setting and measuring KPIs. It’s important to consider how you can eliminate this.

Aligning targets to level of seniority is one tactic: that way, people working in similar roles at the same level have comparable goals. This helps to eliminate any potential personal bias that could result in making certain employees’ goals more or less achievable than their peers.

When it comes to interpreting and measuring achievement against the outlined KPIs, The Chartered Institute of Personnel and Development (CIPD) suggests having all results double-checked by an independent employee to increase accountability and minimise bias.

Target tracking technology

It’s no secret that having your goals written down and keeping them visible increases the chance of achieving them.

But with so many targets for employees to monitor – their own personal figures as well as those of their teams and the company as a whole – does a whiteboard on the wall really cut it?

Leaders will need to consider whether it’s time to invest in some technology to track targets across all departments and KPIs. Dashboards and leadership tables can appear on screens in the office, so they’re visible to employees but are also automated, totting up the figures digitally so that no one has to worry about doing the maths.

This allows you the freedom to tailor your targets more specifically without concern that they’ll be tricky to keep track of.

Sarah Penn

Sarah Penn analyses statistics on a weekly basis to help with target setting

“With our sales team, we carefully analyse statistics on a weekly basis such as headline sales figures, average orders and how many quotes are being generated. We look at it from an individual basis too. So we consider that an established sales employee will be less likely to generate quotes as they already have a number of key clients in place compared with a new employee who needs to generate more quotes and interest from customers.”

Sarah Penn, CEO of Outstanding Branding

The cold hard facts

McKinsey found that 91 per cent of businesses with successful performance management processes link employees' goals to company priorities. The reason is simple: employees will be more effective if they can see how their individual goals fit into the big picture.

Common mistakes with setting employee targets

Not ensuring employee buy-in

Handing seemingly arbitrary sales targets out to employees is one way to approach goal setting, but it’s not the most effective.

There should be a dialogue around KPIs, so staff understand how you arrived at the number in front of them, how their performance against that target impacts the wider company (and, in turn, them as an employee) and what support they can expect from you.

For that to work, there needs to be a certain level of transparency within your business. All members of staff need to understand the company’s goals and the ways in which good news for the company translates into good news for them as individuals.

Staff who are engaged with their targets are more invested in hitting them.

Letting goals stagnate

To be successful, businesses need to be dynamic and constantly evolve to meet the changing demands of customers and shifts in the market.

One of the biggest mistakes businesses make is failing to make targets flexible enough to react to these changes.

Longer term targets and KPIs have their place to keep momentum and ensure that what people are working towards is relevant. However, consider making shorter term goals or even adapting targets that are already in place.

This isn’t about moving the goalposts – it’s about staying relevant, spotting opportunities and being fair to staff.

Setting unrealistic targets

It’s easy to think that if you try to get employees to give 110 per cent, you’ll at least achieve 90 per cent. But that’s not how it works.

If you make targets unattainable, you’ll find that staff become disengaged and dissatisfied with the business. If staff see goals as unreachable, however hard they work, what’s the point in trying?

Look at what’s been achieved before by other staff at a similar level of seniority to work out what is attainable and what is too ambitious for now.

Aron Gelbard

Aron Gelbard warns against picking big numbers out of thin air for targets

“We’ve always tried to have our forecast grounded in reality, rather than just putting huge numbers in our plans with no justification.”

Aron Gelbard, CEO of Bloom and Wild

The cold hard facts

It’s a good idea to tailor your approach to target setting based on the structure of your company, but peer involvement and teamwork shouldn’t be downplayed in the process.

The Gartner Performance Management Benchmarking Survey 2019 showed that 82 per cent of employees work closely with their colleagues. Reflecting this in your target setting could help strengthen teams and encourage collaboration.

Quick wins for improving your target-setting process

Introduce new incentives

Mixing things up when it comes to incentives and bonuses can reinvigorate your team and provide the motivational boost that’s needed to hit ambitious targets.

A yearly bonus is great but won’t necessarily impact day-to-day performance. Try implementing shorter term incentives – both cash and non-cash – that can keep momentum constant.

Some ideas for non-cash incentives are:

  • Time off
  • Extended lunch break
  • Food or drink
  • Attendance at a conference or training session of their choice
  • Flexible working hours for a set amount of time
  • A leadership board that’s visible to the whole team

Book in regular one-to-ones

While micro-management isn’t the way to help staff hit those numbers, it’s also unhelpful to leave them completely to their own devices.

Regular face-to-face meetings give staff the chance to ask questions and seek support, while also allowing managers to track progress and pick up potential issues more easily.

Decide on appropriate intervals for these – that could be once a fortnight, monthly or bi-monthly – and get them in everyone’s calendar.

Involve staff in target setting

Employee buy-in is essential when it comes to targets, so leaders should make sure staff are actively involved in the process.

Encourage managers to sit down with their employees and collaborate on targets. It can be useful to come up with a draft in the first meeting, then have a follow-up meeting a few days later to review the targets and get them set in stone.

Find out employees’ personal goals

It helps for staff to know that they can personally benefit from hitting their targets; that their efforts aren’t solely for the benefit for the company and its leaders or shareholders.

Find out what employees’ career goals are in one-to-ones and think about how you can support those using the targets you set. For instance, if an employee would like to be more involved in a different part of the company or is interested in promotion, tie those into the KPIs you set.

Alice Weightman

Alice Weightman believes that targets need to give employees a sense of purpose

“To keep people inspired and motivated, they want to feel part of a growing business. Every business needs a sense of purpose and a vision of where they want to go.”

Alice Weightman, CEO of Hanson Search and The Work Crowd

The cold hard facts

Just 66 per cent of workers believe that their managers are good enough at giving recognition, making it one of the weakest areas of people management. Bear this in mind when you’re motivating employees to meet targets and make sure you’re spending time recognising their efforts too.

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