I am the advisor for the 1622 private board group of Lingjiao Workshop, whose members are entrepreneurs from across the country. We used to meet every two months for two days. Now, during the pandemic, we hold a private board meeting online every week to closely monitor everyone's progress.
Recently, one of my group members raised a question:
Under the pandemic, the various departments below may not be able to meet their targets. What should we do?
Should we adjust the performance targets for each department?
My advice is: If it is indeed impossible to achieve, you can appropriately adjust the targets.
-01- Targets that cannot be achieved should be lowered
Of course, this pandemic has not impacted all industries; some have actually seen faster growth and more orders than before. But for most industries, the impact is quite significant.
So I say, if you are fairly certain that the original targets are unlikely to be achieved, then it is better to adjust them appropriately.
Why?
If you, as the boss, feel that they cannot be achieved, then the employees on the front line will feel even more so. In the end, if everyone feels the target is unattainable, then the target becomes meaningless and loses its motivational effect. Without motivation, the company's overall performance will inevitably suffer.
Let me give an example. Suppose your original target was 100. Under current circumstances, it is likely that employees, with the same effort, can only achieve 80. If you don't adjust the target, employees lose motivation. Since targets are linked to incentives, if your incentive is tied to a target of 100, then the difference in incentives between achieving 80 and 60 may be negligible. So, even though they might have hoped to achieve 80, they won't try, and by the end of the year, they might only achieve 60.
Therefore, for the better development of the company, I really suggest you consider adjusting the targets you set for your employees.
-02- A good target is one that employees can reach with a little stretch
Some bosses may not agree with this. They might say:
The targets we set for employees are supposed to be difficult to achieve.
If they are easy, then it's not an incentive; it might as well be salary.
Incentives are for those who exceed expectations. I never expected employees to achieve the targets I set.
But if they do, then they deserve a reward.
Whether they admit it or not, in the real business world, there are indeed bosses who think this way. Not to mention that the pandemic is a force majeure causing employees to miss targets; even without it, they set impossible goals. They firmly believe in the saying: "Aim high, and you'll hit the middle; aim at the middle, and you'll hit the low."
So many managers set targets for subordinates with the idea: I know you can't achieve 100, but I'll still set 100, so if you achieve 70, that's fine. If I set 70, you'll only achieve 40, and I'll lose out.
Actually, this is a very dangerous mindset, and I strongly advise against it.
Why?
Once you set it this way, at the end of the year, if your subordinate works hard and achieves 70, you acknowledge it. Then you face a very awkward choice: do you give them the full bonus or not?
Some bosses who like to keep this power in their hands might say to their subordinates: "You did your best. The environment was tough this year, and we faced difficulties. Under these circumstances, you still achieved 70. Well done. You worked hard, so I'll give you the full bonus."
Your subordinate is very happy and thanks you for being a good boss. You also feel like a good boss.
But if you do this, from that day on, you have shown your subordinates through your actions: The target doesn't matter; showing the boss you worked hard is more important than achieving the KPI.
The next year, when you set targets again, will your subordinates take them seriously? No. They will only focus on how to "show" effort in front of the boss.
So, what makes a good target?
It must be a target that employees can achieve with a little stretch, not one they feel is impossible no matter what.
-03- How to adjust?
You might ask, now that the first quarter is over, how should we adjust the targets? After all, no one has encountered this situation before.
At this point, to ensure that all your employees and departments agree with your adjusted targets, you need a reason, not just a random number.
For example, during the SARS outbreak in 2003, our industry overall declined by 15%, so we lowered our targets by 15%.
Alternatively, you can refer to GDP growth forecasts. I recently saw a Morgan Stanley forecast for US GDP. It predicted US GDP growth of 2.1% in Q1 2020, -2.4% in Q2, -30.1% in Q3, and a rebound of 29% in Q4. Then, for the following five quarters, growth would exceed previous years.
What does this data mean? It means that after negative growth, there may be a sharp rebound. A similar situation will occur in China, though we don't know the exact figures. Our Q1 GDP fell 6.8% year-on-year.
If this forecast is reliable, it gives us and our employees confidence. What confidence? That despite the pandemic and the cliff-like drop in performance, as Morgan Stanley predicted, there will be a sharp rebound later. On average, US GDP may still grow for the year.
So, when setting targets, you can base them on such GDP forecasts. This gives you a basis and also gives employees some confidence.
Of course, you can base it on other conditions and then reduce the overall performance targets by 20% or 30%.
In addition to simply lowering targets, you can also keep targets unchanged and add a special incentive to motivate employees.
What does that mean?
For example, if employees originally received A yuan for achieving 100, and no incentive for achieving 80, you could add a special pandemic incentive: this year, achieving 80 earns a bonus of C yuan. If they achieve 100, they get A+C yuan. Under the pandemic, not only are salaries not cut, but if they perform as well as usual, they can earn extra.
-04- Final words
Some bosses might not understand why, if employees achieve the original target, they should get more than the original reward. After all, the company is not a charity; the rewards for performance are scientifically calculated. If you give more rewards, the company may not make much profit.
Indeed, under normal circumstances, achieving 100 should only warrant A yuan. But this year is special. We judged that it is highly likely that 100 cannot be achieved. If employees still achieve 100 under these circumstances, they definitely deserve a reward.
As for insufficient profits or even losses, that responsibility should not fall on employees; it should be yours.
You might say, why should it be?
This relates to how you and your employees share in the company's profits. Employees receive priority returns. If they complete their work and achieve targets, they should receive benefits, regardless of whether the company profits or loses. As the boss, you receive the "residual claim" after priority returns. It is the subordinate part. It could be a lot, a little, or even a loss.
But that is your business, because you bear greater responsibility and risk. That is what a boss should do. Only by being such a boss will employees truly trust you, follow you, and respect you.
Finally, I wish you and your company the best as you forge ahead through this magical 2020 and achieve your goals. When that time comes, spring will be waiting for you.
Source: Liu Run (ID: runliu-pub), Author: Liu Run