Measuring business performance will not drive your business forward by itself. For long-term success and improved performance, you will have to align your metrics and key performance indicators (KPIs) with clear targets and goals.
Importance of setting targets in business
Each KPI you measure must have a target or goal associated with it. Without meaningful performance targets, you may be in the dark about how your business is doing. For example, you may not know:
- if you're on track to achieving your strategic goals
- if your productivity is improving or decreasing
- if your customer satisfaction is dropping
- if your profits are falling or growing
See more on deciding which key performance indicators to measure.
Setting SMART targets
Your business targets should be SMART - specific, measurable, achievable, realistic and time-bound:
- Using KPIs ensures your targets will meet the first two criteria - all KPIs should, by definition, be specific and measurable.
- Achievable - you need to set ambitious targets that will motivate and inspire your employees. Look back at your recent performance to get a sense of what is feasible.
- Realistic - setting realistic targets means being fair on the people who will have to reach them. Make sure you only ask for performance improvements in areas that your staff can actually influence.
- Time-bound - people's progress towards a goal will be more rapid if they have a clear sense of the deadlines against which their progress will be assessed.
See how to use KPIs to assess business performance.
Assigning responsibility and resources for targets
After you set your business targets, you should assign clear responsibility for delivering each of them.
Your top-level strategic objectives may be abstract and business-wide. However, your KPI targets should be concrete and clearly owned by a department or individual.
Hitting your targets is unlikely to be a cost-free process, so be ready to make the necessary resources available when needed. Also, undertake regular reviews to assist with motivation and to make changes if the progress made isn't as expected.
Read more about employee focused performance measurement.
Reviews and continuous improvement
It is important to regularly review how the targets are working and allow for any adjustments. It is likely that you will need regular reviews, updates and revisions to your business plan and targets in order to maintain performance and business success.
A planning cycle can enhance your ability to make changes in your business routine if necessary. Good planning helps you anticipate problems and adapt to change more easily. See how to prepare a business plan for growth.
If you need expert support with assessing your business performance or setting targets, you can appoint a non-executive director or seek help from skilled management consultants.
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