Targets without an objective can never be effective. A target a something that, if achieved moves us toward our objective. If we do not know what the objective is then we cannot produce targets. The problem is that many organisations give out targets without making the objective clear and that’s why targets are often not effective.
There are many examples of businesses using an increase in Return On Capital Employed as a target. banks love these numbers when judging businesses ROI, ROCE, etc etc. but forget, along with others, that they are not useful unless they move us forward toward the objective. Any idiot can increase ROCE by just not investing and indeed this is exactly what happened in UK business in the 1970’s and that was a disaster. Many companies will base their investment strategy around what looks good short term to financial institutions and the City without considering the real objective.
Using increase in sales as a target is another. The Wells Fargo company is a great example of how not to do it. Approximately twenty years ago the senior team at Wells Fargo decided that cross selling was the way to grow the company and so they made that the target for managers and employees. There were massive penalties, including dismissal for missing targets. Result – targets were hit by creating false accounts, loans and credit cards. The targets were achieved, managers and executives praised, and all was well. When the truth came to light around 3.5 million people discovered they had products they never applied for, the company ended up with around $3.5 million dollars in penalties and a reputation shot to hell. If the objective was to destroy the company, then the targets were good ones otherwise, they were stupid. Targets are not objectives.
Spend a bit of time looking at your targets and ask, “do they really help us achieve our objective?”
Objective first, targets second.
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