Only if you know where things are supposed to be heading you can can achieve top performance. This applies to both management and employees. Target agreements are ideal for this purpose. They not only provide you with strategic transparency. They also enable your performance to be evaluated. How can you find, formulate and evaluate the right target agreements for you or your employees? Check out this article.

Target agreements

Target agreements are a valuable tool for companies to drive success. But they also offer valuable opportunities for employees to realize their potential in their own jobs. And especially to develop new potential for their own career planning. In order for them to succeed and create real added value, however, a few points need to be considered. We´ve put the best tips and rules for target agreements together in the form of a Q&A session.

Why are target agreements important for companies and employees?

Target agreements serve the purpose of corporate management. It is a targeted management technique. Managers and employees work towards a jointly defined goal in a focused manner. On the one hand, these defined goals serve the company and its success strategy. On the other hand they pursue the purpose of personnel development. Target agreements not only allow your performance or the performance of your employees to be evaluated. They also increase your or your employees’ motivation. The latter of course provided that you selected or negotiated targets suitably.

To what extent do companies that use target agreements differ from those that do not?

Companies that use target agreements communicate more clearly internally and externally. Clear goals ensure transparency and commitment. If you have prepared them accordingly, you can also measure them. That’s why target agreement are used particularly frequently in sales. Same applies in marketing when it comes to customer acquisition.

Are there also scenarios or situations in which target agreements should not be used?

Yes, there are. Because not every employee necessarily needs an individual target agreement. That depends very much on the type of job. As an example: you would have a very difficult task to find quantifiable individual annual targets with the safety specialist. Furthermore, the targets become useless if they are used incorrectly. So here, a distinction should be made between target agreement and performance appraisal. The latter is important for every employee. For example, if you want or need to identify strengths and weaknesses. This performance appraisal should take place at least once a year in an individual interview with the respective supervisor.

Who should be involved in the target agreement process or performance review?

You as the respective employee and your direct manager should of course be involved. In some cases, your direct manager’s supervisor can also be involved. For example, if you require resources for the achievement of your goals, which cannot be approved by your direct manager.

Which employees should get target agreements and who should not?

As far as it makes sense, every employee should get a target agreement. Nevertheless, there are also jobs where it is difficult to make the goals quantifiable. For example, jobs where no mistakes should be made, such as the above-mentioned safety specialist. In such cases it is not necessary to discuss a target agreement.

How many target actions should be agreed?

The basic rule is: as few as possible and as many as necessary. In addition, it is more advisable to agree on larger and more ambitious goals. To set several intermediate goals than to define many small goals. This way you work on a larger project as a whole. On the opposite, working on many smaller goals is more dispersed and you cannot penetrate so deeply into the respective matter. Nevertheless, you must always decide on a case-by-case basis.

How do you choose the right time frame for target agreements?

Annual targets make sense if regular target checks and updates take place during the year. Intermediate goals and measures for goal attainment should also be agreed upon during the year. The employee must be regularly informed about his status so that he knows whether he is “on target” or “below target”.

What should be done if an employee is “below target”?

If the achievement of goals is at risk, the manager must intervene early and work with the employee to analyze the situation. Why is the achievement of objectives at risk? And then develop measures accordingly! Which measures can ensure achieving the goal after all? But don’t forget: the employee himself/herself should “invent” these measures.

How do you find the right target agreements for yourself or your employee?

The company determines the basic direction of the target agreement. For example through communicated corporate goals, corporate strategy, career plans or similar. But then, of course, it also depends on the employee’s will, potential and ideas for the future. After all, the employee must accept his target agreement(s) in order for them to be truly effective. Therefore, companies and employees should develop target agreements in a dialogue if possible.

What role do my managers play in defining target agreements?

Of all the many management tasks, the most important one is to ensure that goals are set. Secondly consequently monitor the achievement of these goals and, if necessary, adjust them. One quality of good managers is that they are aware of the importance of target agreements for companies and employees. And they take sufficient time to formulate and find target agreements. A manager has a certain amount of leeway within the framework conditions set by the company. For example, a manager who is aware of the potential of his employees can agree more ambitious goals with special high potentials. It is important that employees are challenged, but not overburdened.

Examples of target agreements

Very specific and measurable target agreements would be as follows, for example:

  • May 202x: I will have acquired at least three new customers.
  • April 202y: I will receive certification for Design Thinking.
  • September 202z: On this date I will already be heading a team.

The advantage of all these formulations is obvious. You can clearly determine whether you have reached your goal or not at the defined time. In this way you can optimally track your goal fulfillment.

Negative examples would be the following:

  • I will try to acquire some new customers.
  • Next year, I’m doing a certification for Design Thinking.
  • I will get a promotion.

Unlike the examples above, these formulations are too vague and imprecise. When exactly should the goal be achieved? What exactly does the goal look like? What does it involve? None of this can be seen in these formulations. They are therefore unsuitable as target agreements.


Hints for defining and formulating target agreements

There are various formalities that you should observe in order to make target agreements meaningful:

  • Goals must be set out in writing in order to make them binding.
  • On the management side, sufficient time must be planned for finding and formulating goals.
  • If the target agreement is linked to a bonus, a version signed by both parties must also be send to the HR department.

If you are preparing for your next target agreement meeting and would like to use this opportunity to ask for a raise, check out our article Salary Negotiation: Hints and strategies.


Implementation & Evaluation

What do you need to consider when implementing the target agreements?

In any case, companies and employees should regularly check how the achievement of objectives is progressing. This also includes agreeing on concrete measures that must be taken to achieve the goals. If, for example, additional resources in the form of further training. Also if further budget, time or similar are required, this must of course also be discussed. This then also includes making the appropriate resources available or adjusting the target agreements.

In what framework can this be done? Are feedback meetings a sensible format for this?

Regular feedback meetings are absolutely necessary. If necessary, framework conditions may change so that goals are no longer achievable. This can be the case, for example, with a promotion. Or goals are reached early on, then new goals should be found.

Does it make sense to create additional incentives to increase motivation?

In sales, sales targets and their achievement are usually tied to a bonus or revenue sharing. Nevertheless, goals in themselves, i.e. without additional incentives, must be attractive so that employees accept and pursue them. Their achievement can also be linked to a bonus or reward. But this is not always absolutely necessary.


SMART - Important for all target agreements

When defining goals, a decisive criterion is objective measurability. After all, you have to be able to objectively evaluate whether and how an employee has achieved a goal. This determination should never be based solely on subjective perceptions.

The SMART formula is a very helpful method for defining your target agreements. You can use it to ensure that the goals set are actually quantifiable:

  • Specific.
  • Measurable.
  • Attractive (or Accessible).
  • Realistic.
  • Scheduled (with a defined time horizon).

It is also important that the target agreements are formulated as a future state. In this way, they sound like an actual fact and not just a simple wish, and anticipate the achievement of objectives in some way.

Check out this short video from YouTube on the SMART principle: