If you’re a performance management practitioner, you already know metrics should have both an actual and a target value. Actual is the current value of a metric while target is the value you would like it to be. (NB: I strongly prefer using the word target instead of goal because the latter can easily be confused with objectives.) In fact, creating a target for a metric is one of the three required steps in turning it into a key performance indicator.
However, you may not have considered that a target is the value you would like a metric to be at a specific point in time. If that point in time is far enough in the future, comparing the current actual value to a future target value may lead to unexpected consequences.
For example, a call center might target 85% of the incoming calls to be resolved on first contact, leaving a small percentage for follow up. However, if the first call resolution rate is currently low, it might not be practical to achieve the target value for 18 months. If we mistakenly compare current performance (say 45%) to the long-term target performance (85%), we’ll likely end up with a KPI which is red and demotivate employees. After all, they know that it’s not possible to reach that performance right away and will interpret the results to mean management doesn’t believe they are trying to improve.
If we instead establish multiple periodic targets (quarterly or even monthly), we can compare the current actual value to the current target. In other words, what the value is versus what we wanted it to be right now. For the call center, we might use quarterly targets of 50%, 60%, 70%, 75%, 80%, and 85%. After one quarter, we compare the actual of 45% to the target of 50% and conclude that we’re doing reasonably well so far. However, after the second quarter, we need to have made significant improvement or else we will compare unfavorably against 60%.
You might have noticed that the target values are not evenly spaced. In essence we are saying that we can make more progress at the beginning – low hanging fruit – but later on it will be harder to continue to improve.
By adopting multiple periodic targets, we are monitoring our incremental progress towards defined milestones, instead of just hurdling towards a destination. And by understanding our progress, we can make course corrections along the way – before it’s too late.
So, the next time your boss acts like the little kid in the back of the car and asks “Are we there yet?”, you can answer “No, but here’s where we are compared to where we expected to be right now”.