Choosing your targets, the types and difficulty needs thought and consideration.

Choosing your targets is the right way to achieve your success.  Reaching your Northern star is your main aim, moreover having targets helps monitor your progress.  You are not alone!  Let me guide you along the path so we can both reach our goals together.

It's a question many businesses face - what should our targets be? How tough should they be? Should we focus only on financial targets, or are there other areas we should be looking at? In this podcast I’'ll look at why financial targets might not be the best option for your business and explore some of the other options you have.

If you're looking to set targets for your business, listen to find out more .  You might just find something that works better for you than strict financial targets.

Conclusion

So, what should your targets be? Should you focus exclusively on financial goals? There are a few things to consider when making this decision. Listen to the podcast to find out more about why financial goals might not be the best option for your business and explore other areas you could target. We discuss different types of targets and how tough they should be, so that you can make an informed decision for your business. Which type of target will work best for you?

For more business and finance, news, advice and tips, don’t forget to subscribe and watch our weekly videos on I Hate Numbers, listen to our weekly podcast I Hate Numbers.

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Furthermore, my mission is to inform, inspire and educate you to get closer to your numbers.

You can make more profits, save tax and time, improve your well-being and your money mindset.

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Should your business focus only on financial targets? When you choose your targets, how strong, how tough should you be in when you set targets for yourself and your team? Those two questions I'm going to answer in this week's I Hate Numbers podcast. This is the podcast that's got a mission to help you improve your money mindset, increase your financial awareness, make more profit for you and your business, save tax and save time. That's a fantastic group of objectives if ever I heard them.

You're listening to the I Hate Numbers podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Let's crack on with the podcast. Financial targets are often used in businesses because they are seen to be quite straightforward to assimilate. There's an assumption that those numbers give us the insights that we need, the conclusions to the questions that we're asking, they are very helpful. However, they can be dysfunctional and they can give us a limited insight. Let me explore the problem, certainly three of them that we have with financial targets.

Number one, you may be able to see that your profits have fallen. This could be due to reduced revenue. But of more interest, of more insight and more help is the reason why your sales have been lost, why they declined. It could be a quality problem. The increased number of complaints from customers, results in products being returned, seeking discount on services you provided. So quality is not going to be reflected in a straight financial target. Causes are not often financial. Short-termism is an often problem that's linked with financial targets? If you link rewards to financial performance, that may tempt your team to make decisions that will improve performance in the short term, but it may have a negative impact on the long term profitability of your business.

Decisions may be made to defer and cut back on investment, procure cheaper materials. Effectively, in the short term you can hit your profit targets, but long term there could be a detrimental impact. You could argue that this is a danger of any sort of target, financial or non-financial. However, the risk of short-termism is much greater with financial measures. One other quoted negativity about financial targets is that they can be manipulated more easily than non-financial targets. There may be decisions made to delay investing money, incurring costs because they're going to be captured in this year's performance numbers and therefore that's going to dilute the financial performance and that might have a detrimental impact on somebody's bonus.

Revenue may be brought forward in one year when actually there have been studies that have carried out where managers may be tempted to manipulate results, be a little bit more creative here in order to hit their bonuses and get their rewards. There may be a temptation to be more creative, shall we say, how things are reported, where we may defer delayed costs being incurred because that would have a detrimental impact on financial performance and therefore that bonus may be in jeopardy. Nonfinancial targets can be also manipulated, but there's much less risk with them compared to our financial targets.

Another problem with financial targets is it doesn't convey to the whole picture these aren't the things that necessarily drive customer sustainability, customer satisfaction quality are as important in terms of hitting the profit line. If you get the quality customer satisfaction correct then profit will tend to drive from there. Another consideration we need to make is when we choose our targets and it should be a blend of financial and non-financial targets, is how tough those targets should be. Targets are set fundamentally as a marker and milestone going towards achieving objectives.

We may reward our team, we may reward ourselves if we accomplish and hit those targets. Hitting targets can be a very motivational effect and what we have to be very careful is the level of difficulty that we set for those targets. If your targets are considered to be too easy, perhaps matching performance of a previous year, then there is no incentive to actually drive harder. There's no incentive to actually motivate the individual or your team to try a little bit more to actually get towards your end objectives. So be very careful of setting targets who are considered too easy or too straightforward. The other extreme is to make targets difficult.

Difficult to the extent that they become unachievable. If targets are set without the participation of the stakeholders, the decision makers, the people who are going to be delivering your services and products, then they are likely to not be achieved. If the targets are centralised from senior management without any involvement and they effectively like double last year's sales without the necessary resources going towards to meeting those targets, then that can be demotivational. We've got two extremes there. Set the targets at a too easy level, you're likely to build in slack, you're likely to have a demotivated workforce. If you set it to the other extreme and it becomes next to impossible, then it is pointless having the target in the first place.

What we want is to find that sweet spot and to find targets that are challenging, that push our individuals, our team and yourself to try that a little bit harder and making sure that we've got the resources invested to help meet those targets. So what we're looking for is targets that challenge us. If we draw that analogy, if your intention was to improve your fitness, improve your wellbeing, you may decide that a gym routine is the thing for you. Now, if you're capable of doing repetitions on the multigym, if you're capable of going for walks that exceed 10-15 minutes, then if your target is there to say you match that, that's what it will be for the next month. You're not really pushing yourself beyond those accepted boundaries.

If you say you're going to quadruple the intensity of your workout, then you're setting up for failure. What you need is something that pushes you slightly beyond the easy level, but not quite that difficult level. This is not a hard number, but it's the idea of challenging targets are the preferred approach. Make sure that you involve your team, your stakeholders, intake those targets and they're more likely to be achieved. Now remember, folks, targets are there as a marker. They indicate how successfully you are achieving your end objective.

So let me recap. We've got the idea of blending targets, both financial and nonfinancial. Typical ones might be level of profitability, level of money in your bank account. Non-financial targets could be in terms of quality and service, in terms of customer engagement, in terms of workflows, internally, whatever is important for you. Have a blend of the financial and the non-financial. And when it comes to the difficulty of your targets, make them between easy and difficult. Make them challenging. Folks, I hope you've got some use on this podcast. I'd love it if you could share it with those who you feel could get some benefit from that. And until next week, happy target setting.

We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.