THREE KINDS OF NUMERICAL TARGETS
~ 5 min reading · ~ 25 min at Neave’s pace
Let’s spend a little time revisiting those massive issues of targets and appraisals. First, let’s be sure of what we are talking about. All “targets”? All “appraisals”? Well, no.
First, a reminder about appraisals. I’ve pointed out on Day 5 page 22 that the term “performance appraisal” means different things to different people. If it is really true that an organisation’s “performance appraisal” procedure is genuinely designed for coaching and help rather than for judgment, then fine—except, as I also implied there, in order to avoid confusion maybe it ought to be called something different.
In this section we shall concentrate on numerical targets. However, as already pointed out in the second paragraph of page 1, in the Introduction, there is a strong link between them and appraisals since the latter often involve the setting of targets and then the judgment of success or failure depending on whether or not these targets are subsequently met.
Concerning numerical targets, I was indebted to my good friend, the late John Dowd, for pointing out to me over 35 years ago that there are three types of management figures which may be referred to as “numerical targets”. They may look the same but they need to be treated very differently. The three are:
facts of life;
numbers for guidance and help; and
numbers for judgment, punishment, reward, etc.
All three terms mean what they say! A “fact of life” means something that is known to be true—it’s not a matter of opinion, it’s not a matter of argument. Probably unpleasant, but true nonetheless! So, for example, suppose your organisation has borrowed a lot of money from a bank and is told that, unless it reaches a certain profit figure by the end of the year, the bank will close it down. If this bank is known to be one that keeps its promises, that profit figure is a fact of life, and you would be foolish to treat it in any other way.
“Numbers for guidance and help” should also be what they say. They may include predictions, forecasts, anything to help you decide priorities, numbers which will help you to understand what is needed from you elsewhere in the company and by its customers. But note again: “for guidance and help”, not “for judgment, punishment, reward”, for that’s the third category. A number in the third category is not used for the purpose of the second category—except perhaps in the sense of guiding and helping you to survive in a bad management environment!
What I mean by the second category is guidance and help for you to understand how to try to contribute well to the organisation’s and/or your team’s needs and objectives. Further, it can sometimes be useful for individuals to set themselves “numbers for guidance and help” (indeed, I have done so myself), especially e.g. when there are deadlines that just have to be met. But then that’s the individual’s own choice on how to proceed, not somebody else’s—and that’s a very different matter. In the third category, it is the numbers themselves that become the objectives. For, by definition, reward or punishment will ensue depending on whether or not those numbers are met. They include the numerical targets set in your annual performance review. They include commission steps for salespeople (e.g. Gallery Furniture’s 10% commission for weekly sales of $7,000 or above, but only 5% commission for $6,999.99 or less). They include “work standards” such as described on Day 5 page 27; examples are the number of customers that supposedly should be dealt with per hour in, say, a bank or a supermarket; or the number of central heating boilers to be serviced or printers to be repaired in a day by an engineer. It should be noted that many types of number (including some of those just mentioned) could be in either Category 2 or in Category 3. Which it is depends upon the style of management.
Of course, Dr Deming was not criticising Category 2; and facts of life are facts of life (c.f. his reference to the bank account in the final Deadly Disease (Day 5 page 26). His frequent “verbal onslaughts” were against Category 3: i.e. against bad management style rather than against the numbers themselves.
Incidentally, in view of another fact of life: variation, one might sometimes make a case for providing a “target range” rather than a single target number. But that still doesn’t solve the problem of bad management style, since then that range would be treated as “specifications” (i.e. “OK” inside and “not OK” outside); and, as you already know, we shall be spending time on that particular problem a little later today.
ACTIVITY 7–a
Think of a few further examples of the three kinds of numerical targets. With Categories 2 and 3, mention features of the corresponding management style as appropriate. There may be some examples in your own organisation that you could include: they may affect you personally, or your department, or elsewhere. You may also recall some from the “True Stories” on Day 6 and there may well be yet more for you to insert as you read through the further such stories beginning on page 9, in Many More True Stories.
Category 1—facts of life:
Category 2—numbers for guidance and help:
Category 3—numbers for judgment, punishment, reward:
(There is a little discussion on Appendix page 31.)
ACTIVITY 7–b
Remind yourself (e.g. by looking back at what you’ve written about Point 11 and the 3rd and 5th Deadly Diseases (on Day 5 pages 10–11, 22–23 and 26–27 respectively)) of some of the reasons why Category 3 is incompatible with the Deming philosophy. Again include specific examples from the true stories on Day 6 and be ready to add more here as you read through today’s further true stories on pages 9 to 18, in Many More True Stories.