The Hidden Cost of Setting Targets Too Low

The setting of annual targets, or Key Performance Indicators (KPIs) in a business needs to consider many factors. Simply put KPIs bridge the gap between strategy and operations and should always start with achieving the strategy in mind.

Examples of important considerations could be expectations of shareholders in the private sector, funders in the not-for-profit sector or efficiency expectations in the public sector - just to name a few.

This piece is not intended to cover all of the details of effective target setting but is focused on two considerations which are rarely taken into account in the workplace, and yet the importance of which are abundantly clear in elite sport.

That is the influence that targets have on motivation and innovation, either for the better or for the worse.

One of the most common pieces of information which is used to arrive at annual targets is the available data on past performance. Clearly this is critical information to have at hand, however, this is often used as a benchmark on which to aim for an incremental improvement.

When it comes to setting targets for the year ahead the result achieved in the previous year is considered, and then something resembling a 5% gain is added. Of course, there will be more to the process than that, but the result is along these lines - sound familiar?

Why not higher? There can be many reasons; worried about not hitting the target, thinking it better to "under promise and over deliver", wanting to please the funder, or maybe fearful to place staff under "too much pressure".

These reasons can all make sense on the surface, and I am sure you will have heard them plenty of times before. However, what does setting an under-ambitious target say to the people of the organisation? This is what I believe many leaders fail to consider.

When leaders communicate to their teams that the expectation for them moving forward is a modest gain, intentional or not, what they are actually telling their people is "that is what I believe you can do". As a result, the modest target which is intended to be "achievable" does nothing to inspire motivation from those responsible for delivering on it.

Whilst all too common in the workplace, imagine a similar situation in sport, particularly at the elite level.

Imagine a coach of a team who finished 8th in the championship the previous year setting a target for the team to finish 6th this year. How would the players feel? Of course they would question the coach’s belief in them. Think about being a supporter of this team and watching the coach describe their ambition of finishing 6th next year in a press conference. No doubt you would feel a similar way and wouldn't be overly inspired to be a passionate supporter for the year ahead.

A coach in elite sport is expected to aim for nothing less than to win. They may put a timeframe on achieving this depending on circumstances, but if they are not striving to lead the team to victory, they will not last very long.

Former Australian Cricket Team Coach John Buchanen is regarded as the most successful ever in that role, and arguably the most successful internationally. When he was appointed, he outlined his vision for Australia to become a truly great (not just good) side and have other national teams in awe of their ability. He called the vision Everest – a symbolic analogy to the goal of scaling a mountain; an extremely demanding and difficult goal to achieve, but also feasible.

Innovation can also be impacted negatively through the setting of modest targets. A workplace aiming for a 5% gain is unlikely to inspire people to think differently and push for new ways to find gains, because ultimately they would rarely have to. It is more likely to encourage them to continue doing things the same but feel as though they are expected to "work harder".

On the other hand, when striving to achieve a target with ambition, innovation is not only encouraged, it is required. Elite sports teams and coaches know this very well as it is at the core of achieving success. In sport if you are not pushing the boundaries and finding new ways to perform better you are effectively moving backwards.

All of this said, leaders cannot simply set high targets and leave it at that expecting their people to deliver the result. Just as the coach does, they must use skill and influence to engage their people in the process of determining the goal, resource them well to enable them to do the job, empower them to make decisions and create the environment to feel comfortable to try and fail, learn and keep going.

All of that is a topic for a further piece, but for now the point is to consider the value being ambitious has for the motivation and desire to innovate of your people.

Ultimately, the danger of setting targets too low is not simply that organisations achieve less than they are capable of. It is that over time, low expectations begin to shape culture, ambition and behaviour. Teams stop striving for excellence and instead focus only on remaining comfortable or avoiding failure.

Leaders and individuals alike must be careful not to confuse safety with success.

Ambitious goals, when supported correctly, can motivate people, fuel innovation, resilience and result in higher performance in a way that cautious expectations rarely do.

In sport teams that begin a season focused only on survival often play with caution and fear, whereas those aiming for championships tend to create cultures built around improvement and belief.

Ambition alone does not guarantee success, but low expectations can place limitations on performance before the season, or the financial year, has even begun.