Ways to Set the Right Targets for Your KPIs

Setting up a performance management system in your organization can be a complex process that demands a considerable amount of time and effort. To make a performance management system effective, business leaders must connect key performance indicators (KPIs) to targets. Are KPIs and targets the same thing? Well, they are not. In this article at Info Entrepreneurs, the author explains how to set targets and measure performance.

Difference Between KPI and Target

The terms, KPIs and targets, are interchangeably used. KPIs help organizations understand how well they are performing in relation to their strategic goals and objectives. Business leaders often start with a strategic objective. Then, they decide how to measure it (KPI) and define a target for KPI.

Top Tips to Set Target

A target for your KPI must measure where you are in relation to where you want to be. Targets must measure:

  • External Benchmarks: ‘Surpass competitor X.’
  • Internal Benchmarks: ‘Surpass last year’s financial results.’
  • Global best practices: ‘Provide best customer service as X company.’

Your targets must have a clear time frame. When the targets are specific and tied to a timeline for competition, there remains no room for confusion or ambiguity. Additionally, the targets must be realistic and achievable. If targets are unrealistic and too hard to achieve, teams won’t strive to accomplish them. The objective of any KPI is to help employees learn and deliver continuous performance improvement. Therefore, setting the right targets is crucial for achieving the outcome.

How To Measure Employee Performance?

Quantitative Measurement

“Looking at employee performance from a financial perspective can be a very valuable management tool. The most commonly-used measures are sales per employee, contribution per employee, and profit per employee,” explains the author. Once executives determine the profit target, it will be easier to set critical KPIs such as revenue and expense.

KPIs for Employees

KPIs from the internal perspective help the organization identify employees’ contribution in making customers happier and gain more profit. While setting KPIs, leaders must focus on activities that will impact customer KPIs. These KPIs will enable the organization to answer what the company is doing to nurture staff’s skills and capability. The KPIs also relate to employee satisfaction results, strategic skills gap, and employee turnover.

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