Targets and Numerical Goals

 

Do individuals or businesses need to set numerical goals or targets to be successful?  I am probably in the minority, because I think they are more detrimental than good.  Over the years I have grown averse to setting them in most cases.  I draw my conclusion based on consequences observed from life experiences and am admittedly strongly influenced by W. Edwards Deming who said we should avoid setting arbitrary numerical goals.  He would give and example of a manager setting a target of increased sales of 10% for the next year.  He would say, “Why ten, why not twelve?”   Until you can answer that question, any number will do.

 

Examples abound of arbitrary numerical goals that have backfired.  Think about the example of Domino’s Pizza where there used to be a guaranteed delivery within 30 minutes.  This target seemed very good for customers and gave the employees a goal to shoot for.  But the famous Domino's Pizza 30 minute delivery guarantee no longer exists, because drivers drove in an unsafe manner and at high speeds in order to make the delivery time.  Failure to make the delivery on time was money out of their pockets, and 

lawsuits due to the resulting accidents affected the company’s bottom line.

 

And then there was the bus driver who was being chastised for passing up stops.  His reply was that it was the only way he could make the schedule that he was given. 

For each of these examples Deming would suggest that they were goals set without a method for achieving them.

 

But all targets or goals do not need to be arbitrary.  Henry Neave in the The

Deming Dimension says there are two other types of numbers that management can use.  They are:

 

·        Facts of life.  If we don't make this profit figure, we will go out of business.

·        Planning, prediction and budget.  These can be used to compare alternative plans.

 

Although these two types of numbers seem pretty straight forward, they can be problematic and therefore must be considered carefully as well.  Take for instance the “fact of life” target of needing to reduce costs by 10% or the company will go out of business.  At first this seems straightforward.  But in reality the company could get more revenue and achieve the same thing – adequate profit to make the company successful.

 

Planning, prediction, and budget numbers are important.  If they are used to decide among alternative approaches, such numbers can be useful.  But their usefulness as planning numbers can be destroyed if they are turned into rigid targets without consideration for how to achieve them and for the consequences or fear engendered if they are not achieved.  When the goals have consequences attached for individuals, generally one of three things will happen.

 

1. People distort the process or system in which they are working.
2. People distort the numbers.
3. People improve the process or system in which they are working.

 

More often then we care to admit, people chose method 1 or 2 to achieve the target – salesmen withhold their monthly sales until the end of the month so they will book the expected amount but not too much, manufacturing ships product that isn’t complete, purchasing doesn’t order necessary supplies just to keep inventory value below the target number.  Obviously it is more difficult and takes longer to do number 3 - improve the process or system to get the desired numbers.

 

After thinking about the issue of targets and goals again, here is what I now recommend. 

 

1. Resist strongly even discussing a goal or target at all until a number of points of data are gathered – the more points the better.

 

2. Ask why a specific target or goal number is necessary.

 

3. Ask what decisions and actions might be taken to try to achieve the target number.

 

4. Ask what the consequences are for individuals and the organization if the target isn’t met.

 

5. Put the data into a process behavior chart before deciding if a numerical goal is warranted and if so what it should be.

 

 

Instead of setting numerical goals or targets, I recommend gathering data over time and putting the data into a process behavior chart (These charts were formerly known as control charts.  For more information about process behavior charts see Making Sense of Data by Donald J. Wheeler).  When the process behavior chart is constructed, you will know the average of the data points, the variation of the data points, and you will be able to make a strong prediction of what the data will look like in the future.  This is hearing the voice of the process or system.

 

If the voice of the process or system does not match the voice of the customer – what the customer wants – then the process or system must be changed.  Sometimes the average of the data must go up or down.  Sometimes the variation of the data must be reduced.  In either case, you are much better informed about the capability of the process or system and the gap between it and the desires of the customer.

 

Even at this point, I resist setting a hard target number.  Rather I suggest that the goal is to make the average move in the desired direction or to reduce the variation as much as possible.  I resist setting hard target numbers primarily for two reasons.  1. Many times the target will limit the improvement possible.  2. There is fear and failure associated with not making the goal.  This is an energy wasting diversion from working on making the process or system better. 

 

As indicated in the opening paragraph of this article, the subject of setting numerical targets and goals is controversial.  I am more accepting of individuals setting numerical goals for themselves.  But I find the negatives of organizations setting numerical goals or targets for themselves significant.  I am very interested in what the readers of this article think about this subject.  What are some examples of “fact of life” numerical goals?  What are some examples of when setting hard target goals were helpful and some examples of when they were not?