Motivating Your Employees Through Setting KPIs, Objectives and Goals

Motivating your employees by setting goals or objectives is known as Management by Objectives. The theory was founded and popularised by Peter Drucker, leading management theorist, in his book ‘The Practice of Management’. Today organisations, both small and large use Management By Objectives to motivate employees and drive performance within their business. So, having explained the theory, how does it work in practice?

Motivating Your Employees Through Setting KPIs, Objectives and Goals

Establish your Organisational Goals

Before you even think about assigning goals to employees, you need to establish your high level business strategy, and from this you need to establish a set of high level corporate goals. This would include dimensions such as: revenue, growth, profitability, customer satisfaction, output, quality etc… The senior management team would also establish targets to place against each one of these high level dimensions, for example, increase revenue by 10% in 2012, or increase customer satisfaction by 5% during 2012.

It is important to establish these corporate goals as they serve as the high level route map, under-which all manager and employee goals must be set. Doing this will ensure that employee performance is correctly aligned with organisational performance.

Establishing Individual Goals Aligned to Corporate Strategy

The Director or Manager of each department needs to establish a set of goals for each team member. In order to ensure that the individual’s personal goals are properly aligned with organisational goals, the managers should base each individual’s goals on the relevant corporate goals.

For example, if a sales manager was assigning goals to his/her front line sales team, their team goals would be focused around new business, repeat business, renewals and customer satisfaction.

A customer service specialist would most likely receive goals based on customer satisfaction, e.g. speed to respond to calls, speed to find a solution, professionalism, product and service knowledge, and possibly sales of add-on services.

A back office professional, like a HR Business Partner, who does not have any direct contact with external customers, is effectively an internal supplier of the client facing teams and other departments. This means that the client facing teams of sales, (along with the other departments), are effectively customers of HR. HR goals would be based around effectively serving their internal client base which might include things like time to hire, and time to becoming productive. HR would also receive cost based goals, such as reducing the average cost per hire.

Setting SMARTS Goals

When setting goals, it is recommended that they are established following a specific format known as SMART, which stands for SPECIFIC, MEASURABLE, ATTAINABLE, REALISTIC AND TIMEBOUNDED and STRETCHING. Below are a couple of examples of SMARTS goals.

  • Increased revenues of product X by 15% during 2012.
  • Reduce time to hire by 5% during 2012.

This is the most effective way to create goals.

Assigning Goals

Personal goals should be assigned to the individual at the start of the review period and ideally the employee should have some input into the design of the goals. This is because employees who are involved in the creation of their own goals are generally more engaged with the process and thus motivated.

Assessing Performance Against Goals

Goals should be assessed as part of a formal annual performance appraisal process. There should also be quarterly interim reviews of performance against goals, so that progress can be checked and help, support and guidance can be provided if needed to help bring performance back on track.