How to: Performance Goals

Performance goals are crucial for effective performance management that aids companies in achieving their objectives. These goals are primarily aimed at realizing the full potential of employees. Goals simultaneously serve to create clarity about expectations, strengthen personal responsibility, and establish priorities. This article outlines what to consider when setting goals.


Performance goals - a Definition

We are looking at a widely used leadership concept dating back to the pioneering thinker of modern management, Peter F. Drucker. He introduced his concept in 1955, calling it "Management by Objectives." In the business world, setting different goals is an essential part of employee management.

More specifically, at least two individuals (usually a manager and an employee) come to an agreement to achieve a specific performance goal to full satisfaction within a clearly defined time frame. Parties can agree on different types of goals, including tangible and developmental goals. The former focuses on achieving work-related results, while the latter is aimed more towards employee development.

Regardless of the types of goals agreed upon by the manager and employee, they serve two functions: providing orientation and pushing performance. Goals provide valuable guidance by offering clear guidelines for the systematic fulfillment of a task. Furthermore, goals can be motivating by introducing new ideas and boosting personal initiative.

Setting SMART Goals

To ensure that the agreed-upon goals are achieved according to clearly defined and transparent criteria, it is essential to adhere to the SMART formula often used in project management. The SMART formula states that goals should be Specific, Measurable, Attractive, Realistic, and Time-bound.

  • Specific: Goals must be clearly and precisely worded.
  • Measurable: Goals must be quantifiable for objective assessment.
  • Attractive: All parties involved must accept the goals.
  • Realistic: Goals should be achievable.
  • Time-bound: Each goal should have a time frame.

However, in practice, some goals cannot be easily determined using the recommended criteria. This mainly applies to qualitative goals, which are challenging to measure compared to quantitative ones. Qualitative goals, such as "improving workplace efficiency" or "successful project completion," should ideally be operationalized. Precisely defining goals in quantitative terms is of great importance.

Before a manager and an employee commit to a specific goal, they should jointly answer the following questions:

  • What is the exact goal to be achieved?
  • How and by when can the desired goal be attained?
  • What specific changes can be expected upon reaching the goal?
  • What opportunities exist for measuring goal achievement and predicted success?

The Goal-Setting Process

The goal-setting process is a multi-step procedure that requires thorough planning and preparation, which should be carried out prior to the goal-setting discussion between the manager and employee. The status review and data collection stages are also vital and serve as a precursor to the goal-achievement discussion, where established goals are assessed for realization or failure.

The subject of goal-setting can encompass various types of objectives. Some common examples include:

  • Performance goals
  • Process goals
  • Strategic goals
  • Revenue goals
  • Behavioral goals

The final stage in the goal-setting process is the bonus payout. This can take the form of either monetary or non-monetary incentives. In the former case, it could be a performance bonus or a salary increase closely tied to the degree of goal achievement. In the latter case, an employee might be rewarded with a voucher, a wellness day, or being recognized as the best employee of the month. Incentives should be tailored individually.


Many managers wonder how they can motivate employees to perform specific actions, often relating to performance, behaviors, revenue increases, as well as strategic and process-related competencies that impact a company's success. Goal setting proves to be a critical task, achievable only through careful planning and preparation.


We would like to point out that our website provides non-binding information, which under no circumstances constitutes legal advice. This also, and especially, applies to topics within the sphere of legal HR advise. The content of this contribution cannot and is not intended to replace individual and binding legal advice. For this reason, all information provided is without guarantee of correctness and completeness, but always researched with the utmost care.

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