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  The Art and Science of Target Setting  Premium

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The recent economic crisis and the collapse of many financial institutions stand as living proof of the dangers of overly ambitious targets coupled with fat bonuses. Targets, at their best, can motivate people to succeed; at their worst, they induce employees to engage in dysfunctional behavior, leading to detrimental outcomes like those recently witnessed. How can companies get it right? The authors studied target-setting practices involving sales managers, account managers and business development professionals in the U.K. over a two-year period. Their research turned up a litany of failures: unrealistic goals, overemphasis on financials, lack of coordination, bad communication, all adding up to dissatisfaction and poor performance. Based on these findings, the authors identify the key moderators that influence people’s behavior and condition favorable outcomes when it comes to formulating targets, incentive schemes and performance measures. They then suggest a 10-step process to improve the whole way in which performance targets are set. It takes some work, they say, but if well designed, targets can resume their original purpose: to drive superior performance.

Tools and Frameworks:
> “The Key Moderators” depicts the interrelatedness of the various elements that drive effective behavior, showing how performance targets, performance measures and incentive schemes need to be aligned.
> “The Target-Setting Wheel” illustrates 10 steps to improve target setting in a cyclical process.

Examples Cited:

Numerous sales managers, account managers and business development professionals are quoted throughout, offering testimonials of their experiences with using targets.

Research Basis:
The authors conducted a two-year study of target-setting practices in contexts where such practices are particularly common: sales organizations. Sponsored by the Chartered Institute of Management Accountants (CIMA) in the United Kingdom, their research focused on four different companies in four different industries – media, financial services, construction and industrial products, all operating in B2B sales. Nearly 100 sales representatives from the four organizations participated in interviews and surveys, and they analyzed documents and specific cases in depth.

About the Authors:

Monica Franco-Santos is a senior research fellow at Cranfield School of Management’s Centre for Business Performance.

Javier Marcos is a lecturer at Cranfield School of Management’s Centre for Strategic Marketing and Sales.

Mike Bourne is the director of Cranfield School of Management’s Centre for Business Performance.
This article is based on:  The Art and Science of Target Setting
Publisher:  Estudios y Ediciones IESE
Year:  2010
Language:  English