Setting Targets

Setting targets for Performance Indicators should be well thought through. This should not be an exercise in looking at the historical average (unless that is specifically relevant) and then apply 10% as the desired increase. You will want to review history, but you need to understand the goal. It is also important to define the KPI clearly.

For example, let's use the retail market's target of sales to sales last year. Retail has traditionally looked at this on a daily basis, as well as rolled up to the week, month, quarter, and year. I have two primary concerns with this:

1. If the weather was bad, we ran a promotion, or some other contributing factor, we may not know it and are really not comparing apples to apples. Additionally, what if last year was really bad? Beating that number doesn't do much for us.  
2. If we are reviewing this on a daily basis, we loose institutional knowledge due to the repetition. What if we miss a day? Is there any repercussion? What if we miss three days in a row? What if we miss 10 days out of 14? Were there enough days in there of good performance to hide the fact that a trend is occurring?

What would make more sense to me would be to look at this number as a rolling average, or take the total sales for the last 365 days / 365 on a daily basis. Here we can very quickly identify a positive or negative trend, as we don't have to look at numbers that swing wildly by the day of the week. Instead of talking about  a couple of bad days, we understand that even though we had a couple of bad days, the overall trend is above the goal. We can also integrate our sales goal and show it relative to the trend line.  

The Value of Scorecarding

One of my first Scorecard exercises is one of my favorites.  It taught me a great deal about the power of scorecarding.  

I did what I suspect most people do.  I interviewed all the VPs and developed a long list of KPIs.  I then used an excel spreadsheet to organize the KPIs.  I put the KPIs down the rows, and the VPs across the columns.  Then to help visualize the data, I placed "red" cells where VPs were directly impacted by the KPIs and "yellow" cells where the VPs were indirectly related.  I did not intend the colors for anything other to call out attention for each of the VPs.

By choosing the "red" and "yellow" I had each of the VPs concerned that they were under performing in each of those areas.  I had to explain a number of times, the reason for the colors.  

• The first lesson was that by associating colors with performance, I clearly had the attention and focus of the executives of this team.  It sparked a number of very strong conversations about performance.
  

• The second lesson is that communication is just as important.  By doing a less than stellar job of communicating (at least from a visual sense) the information, I wasted a tremendous amount of time that should have been used for more strategic discussion.  
  

Scorecarding can be a very powerful tool, but it needs to be used appropriately.