“I’m not quite sure what my boss is expecting from me, but I’m trying anyway.” Whenever employees leave a manager’s office with this uneasy feeling, staff appraisals have definitely gone wrong. Employees want to know exactly what they are asked to do – only then are they able to perform at their best. Read on to find out what you need to consider when developing (smart) employee objectives.
What Are Target Agreements/Employee Goals?
Advantages and Disadvantages
Quantitative vs. Qualitative Goals
How HR Can Help Line Managers
SMART Goals, Intelligent Tactics
What to Consider When Defining Employee Goals?
What to Consider When Agreeing Goals and Targets?
What Are Target Agreements/Employee Goals?
Target agreements are a management tool based on the “management by objectives” principle established by Peter F. Drucker (1955). At least two parties, usually the employee and their manager, discuss the objectives the employees will be working toward over a defined period. At the end of the period, both reflect on whether the employee has achieved the objectives, and to what extent. There are three types of employee objectives:
- Behavior-related objectives, e.g. respond to negative employer appraisals within a day.
- Task-related objectives, e.g. reduce fluctuation rates by 5 percent.
- Developmental objectives, e.g. attend a seminar on how to optimize payroll processes.
Target agreements are aimed at motivating employees and supporting them in planning their career. This process is overseen by HR, which implements a performance management process to ensure that all players within a company define goals systematically, always with an eye to developing employees and promoting employee loyalty.
Advantages and Disadvantages of Target Agreements and Employee Goals
Target agreements are aimed at motivating employees and giving them guidance for their work (above all in terms of prioritizing). They also make it easier for managers to appraise employees’ work. But there are not only advantages to target agreements.
- Tasks are prioritized: Employees know which goals have priority and are able to address these first.
- Employees are motivated: After all, their appraisals are based on facts rather than arbitrary preferences or emotions.
- Employees are given greater responsibility: They are able to define their personal path toward set goals.
- There is greater transparency and clarity: Both sides are aware of what is required.
- Goals foster commitment: This applies to both sides, as they have collaborated in establishing and setting employee goals.
- There is increased pressure to perform: This can hamper creativity and, in the worst case, slow down work.
- Pressure impacts on the work environment: This ultimately also affects productivity.
- There may be a lack of consistency: Goals may not be appreciated as being binding, and follow-up may therefore be inadequate.
- What if goals are not reached? This can result in demotivation and reduced performance.
Better Feedback for Better Performance
Improve your employee’s performance by regularly conducting and documenting reviews – in Personio.
Intermediate Conclusion: The Right Approach Is Crucial
Most companies continue to use target agreements, as has been shown in a study of 241 companies of various sizes conducted by Dr. Heissmann GmbH in 2005. About 90 percent of surveyed companies stated that they were using target agreements.
85 percent of the companies said that target agreements worked well for them or were satisfactory.
So there is no doubt that target agreements work for these companies. However, there’s still room for improvement. For a long time, goals and targets were generally defined on an annual basis, and this is still the case in some industries and professions. Yet this approach to setting employee goals and targets is now considered outdated. After all, feedback, whether positive or negative, should be given in a timely manner so that it can be clearly understood and goals/targets can be adjusted as required. Annual employee reviews are therefore not sufficient. Companies are instead moving toward quarterly performance reviews.
Quantitative vs. Qualitative Goals
Generally, it is easier to measure quantitative goals than qualitative ones. However, target agreements and employee goals should comprise a mixture of both to ensure that goals and targets are set objectively rather than arbitrarily. Quantitative goals are measured via so-called KPIs (key performance indicators). These are usually expressed in the form of specific numbers, e.g. to improve the rating on an employer portal by one star. They are also derived from the department’s goals and help ensure that corporate objectives are met.
Qualitative goals, in contrast, are “softer.” Common examples include improved customer satisfaction. Unfortunately, these “soft” goals are difficult to measure, and they should therefore always be expressed in the form of a concrete, specific goal, e.g. to improve the “satisfaction” rating in the next employee survey by one mark.
How HR Can Support Line Managers
Encouraging and measuring employee performance is one of the most important tasks team leaders and heads of departments perform. Yet they often depend on cooperation with the human resources department. HR is able to use specialized software for this process to document staff development in collaboration with line managers. HR is able to add comments to help prepare comprehensive, balanced employee appraisals at the end of a review period. As a result, it is then transparent how successful the employee was in pursuing and achieving their goals. Experts have come to agree that bonuses, salaries and performance appraisals should not be linked.
SMART Goals, Intelligent Tactics
Performance appraisals are most effective if employee goals and targets are defined according to the so-called SMART principle, with SMART standing for Specific, Measurable, Achievable, Realistic and Timely. SMART goals are therefore the exact opposite of thoughtlessly cobbled-together statements of intent that everybody involved just wants to get over and done with and no one will want to remember later on. The SMART principle puts precise targets into a nutshell: Measurable goals ensure comparability, while realistic goals motivate employees and encourage them to perform at their best.
Attractive goals in turn require that employees agree with the set goals, requiring goals that are not in conflict with employees’ values, fall within their scope of responsibilities and relate to the tasks the respective employees like to perform and do well. The period over which the performance is to be delivered also needs to be defined.
It is the employee’s responsibility to allocate their resources and schedule their work appropriately so that they are able to meet their set goals. But what do smart employee goals need to look like? What do they specifically contain, and how do they differ from vague declarations of intent that in fact prevent employees and thus the entire organization from performing at their best? Read on for some helpful examples.
Guide to Performance Reviews
The following eight points will help you discuss employee achievements, expectations and objectives in a relaxed and constructive atmosphere.
What to Consider When Formulating Employee Targets?
It is essential that employees understand what it is you want them to do. The wording of target agreements should therefore be straightforward, precise and easy to understand. Focus on positive objectives and keep things concise.
Target Agreement: Examples of Smart Target Agreements in Marketing
Poor wording: “Attract younger consumer groups for a new instant organic soup” SMART wording: “Increase awareness of a new brand of instant organic soup among men and women between the ages of 20 and 35 by 30 percent by the end of the calendar year.” Other potential goals include:
- Generate x customer contacts within y months
- Increase the number of website visitors by x% within y months
- Increase the website conversion rate by x% within y months
- Generate x (positive) interactions on social media channel y within z months
- Publish x articles in defined publications over the next y months
- Increase the market share by x% in the next business year
Target Agreement: Examples of Smart Target Agreements in HR
Poor wording: “Strengthen the employer brand” SMART wording: “Improve ratings on kununu and Glassdoor by at least 1 star within a quarter” Other potential goals include:
- Reduce employee turnover by x% within y months
- Generate x applications per advertised position in the next quarter
- Reduce the time to hire per candidate from x to y days over the next business year
- Reduce sick days from x to y days over the next business year
- Shorten the time to the 1st interview per applicant from x to y days in the next quarter
- Reduce the cost per hire from x to y € in the next quarter
- Increase the offer acceptance rate by x% in the next quarter
- Decrease resignations during the probation period by x% over the next business year
What Do You Need to Consider When Agreeing on Goals and Targets?
- Stay realistic and don’t become overly ambitious in your objectives, both in terms of volume and the number of objectives themselves. We recommend that you define no more than three objectives per quarter. These should already include development goals.
- Define the employee’s decision-making authority and scope of responsibility for reaching the goal right from the start. There is nothing more demotivating for employees than finding out that they need to discuss every single step with their supervisor. Define the rules right there and then during the performance review.
- Milestones and follow-ups help both sides keep track of the progress made. How have things been going? How is the mood? Are there any problems, and where might goals need to be tweaked?
- Performance steps and target agreements should be documented to ensure that goals are transparent and can be revisited again later. This template will support you and your employees in doing this.
If you would like to set smart goals for yourself or your employees, you’ll find that a lot of thought needs to go into intelligently chosen goals. How long does it take to redefine processes and establish new ones? What is realistic, given current market conditions? Employees and their supervisors are forced to think about what they really want and are able to achieve.
At the same time, smart goals are always in line with corporate goals: Does management intend to expand its market share in existing markets? Or update its image with new, more contemporary products? Or modernize its culture? When each individual goal clearly relates to an overarching corporate goal and is defined according to the SMART principle, each employee is integrated into the broader corporate strategy.
And this improves motivation, as colleagues find that they are collaborating toward a shared goal and are able to make a significant contribution. Read this Guide for Feedback Meetings to find out what HR and other managers can do to improve their feedback meetings in an organized manner.
See Employee Progress
What are an employee’s specific development needs? Personio allows you and your company’s managers to document performance reviews centrally so that all development is transparent.