While most people don’t distinguish between goals and objectives in every day conversation, I find that performance management practitioners sometimes use the word goal when they really mean target. This potential confusion between objectives and targets explains why I usually recommend against using the term goal when establishing a standard performance management terminology.
From my point of view, objectives, KPIs, and targets are related, but distinct, items:
- An objective describes what you want to accomplish.
- A key performance indicator (KPI) monitors progress towards a specific objective.
- A target is the value of a KPI at a defined moment in time.
As always, a simple example is useful. Imagine a runner who has entered a marathon with the objective to win the race. On the surface, accomplishing that objective is binary – the runner either does or doesn’t win the race. However, to better understand the runner’s performance, we can create the KPI ‘position at the end of the race’ and set the target to be 1. We judge the runner’s performance by creating a grading system that compares the actual value to the target:
1 = success
2-20 = pretty good
>20 = not acceptable
In other words, anything but a top 20 finish would be viewed as poor performance. We could even map these categories to the classic green/yellow/red stoplight metaphor.
The system is very adaptable. As this runner improves over time, we can change the grading system for future races so that only a top 10 finish would be considered good performance. Another, less accomplished, runner could share the same objective and KPI but create a different target and grading system as follows:
< 25 = success
25-100 = pretty good
>100 = not acceptable
If we’re not just interested in performance at the end of the race but want to monitor progress during the race, we can change the KPI from ‘position at the end of the race’ to just ‘position’. In performance management terminology, we have switched from a lagging indicator to a leading indicator.
If you’re a runner, you may have recognized a potential complication. A runner who is a strong finisher may not expect to be in the top few positions during the first half of the race but rather wait until the last few miles for a closing kick. In fact, any particular race may have a disproportionate number of fast starters (so-called rabbits) that don’t pose a serious threat.
To handle this situation, we can introduce a second KPI that monitors performance for the same objective: ‘average time per mile’. Average time per mile can be measured at various points during the race to benchmark performance. Depending on your skill level, the multiple targets could be 5:00 at mile 4, 5:35 at mile 10, and 5:20 at mile 20. An appropriate grading system might be < 2 seconds difference = success, 2-5 secs difference = pretty good, >5 secs difference = not acceptable. Average time per mile also allows you to compare performance between races and between runners with similar capabilities.
We all want to win the race. But we can do a better job of improving performance if we focus on targets to allow us to reach our objectives.