Typical Targets Setting Methods

There are many methods used by organization to help management in target setting process. Typical target setting methods include:

• Derived from Business Goal: Many times the overall business goals are prescribed by the market or by corporate shareholders. In this case, the organization does not really have a choice; it is a derived strategy.
• Benchmark Industry Leaders: Most organizations strive to be number one or two in their industry. Identify those companies that are number one or two and identify their methods for achieving success.
• Improvement Based on Historical Performance: Most organizations use this method to build their budgets. However, this method has serious flaws, as it does not take into account the changing competitive environment.
• Establish Baseline and Define Targets Over Time: This target setting approach is typically used with new measures and desired targets. When there is no basis for defining the performance level required (target), many organizations will allow operational monitoring to set a baseline of performance before setting the target.
• Derived from Customer Expectations: Where the customer expectations set the target for the organization.

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