Achieving Targets- Myths and Realities

I had heard about the word target when I was a school student. At that time I was a Sanskrit Student and our teacher told about target while telling the story of Mahabharata in which how Arjun became successful in Archery. Next time I heard about this word when I was studying for Pre-degree in a college where I had joined for NCC. The Officer who was in charge of our battalion taught us about target while practicing firing. It was the point to which we had to aim while shooting and the bullet had to strike at this point. Later when I joined a bank, I again started hearing about targets and achievements. This time it was neither Archery nor bullet, it was business target.

On those days targets were mainly fixed for deposits and managers used to run helter shelter to achieve their targets at the end of every quarter. Those failed to achieve targets used to lose their chance to get promoted to the next scale. Those who achieved targets were given awards and appreciation. They were also considered in the promotion process. The responsibility of achieving the targets had rested with the branch manager who used to get the support of staff and officers working under him. But these people did not get any punishment for not achieving targets, but they used to get appreciation and good remarks in their service records which also had a weightage in considering for promotions. Hence it was a team work on those days.

Every business organization has targets for their business. A manufacturing company targets at sales and production. Why I put sales first because production should be based on sales potential. Service organizations also have targets where it is their income. The companies and service organizations fix business targets with aim of increasing profit. Profit is the base for survival. An organization earning good profit every year attracts investment. A company which is listed in the stock market and where their shares are traded definitely aim at increasing the profit in order to attract investments. All investors will invest their funds only in profit making companies and will withdraw their investments from the loss making companies. For example the Central Government had sold out their stake in loss making companies a few years back.

As already mentioned banks were targeting increase of deposits. Increase in deposits brings more liabilities and higher interest expenditure which would bring down the profits. Alternatively, targets can be fixed for loans. I used to get calls from many banks almost all days enquiring whether I wanted loan. The reason for fixing target for loans may be for generating more interest income. But insisting on achieving targets for loans alone may result into increase in non-performing assets also unless this portfolio is handled carefully. Because, the enthusiasm of managers to achieve their targets and please their bosses may end up in granting loans secured by fake assets or no assets. Today banks are competing with each other to increase their home loans portfolio. But this sector is very dangerous because of the risk involved in establishing the title of property pledged as security. Recently the Honorable Supreme Court had issued order to RBI for framing necessary guidelines to get search certificate for title of the property pledged by verifying documents for the previous 30 years. The risk of concentrating on loans is that not only it can create dead assets, but also can increase expenses by incurring legal expenses for litigation for recovery. In many cases loans may have to be written off partially or accumulated interest may have to be forgone for the purpose of recovery of principal amount. All these will affect the profit of the banks adversely.

Now the question is how the profit can be increased. Of course lending cannot be avoided completely. Lending is required for meeting statutory and social obligation where the generation of interest income is low. But loans against pledge of gold, silver etc. is considered as well secured if the supporting securities are verified for its purity and value properly. Similarly loans against pledge of shares, deposits etc. are well secured, but the interest income may be comparatively low. My suggestion is that instead of fixing targets for loans, aim at increasing profits.

For fixing profit based targets, it is necessary to identify profit centers. Profit centers are those regions or segments which are having high potentials for generating profits. Certain centers are loss making because they have no potentials for generating profits. But their existence is necessary for the other centers to make profits. Hence fixing targets appropriate to each center is also essential to be successful in achievement.

Another essential factor is people. Some people are experts in marketing and generating business that ensures high profit. But some others are good at organizing and administration. Such people should be deployed in administrative offices. Even marketing people have to be deployed based on the language they are able to speak. For example a person who speaks Malayalam well need not be good at villages in Karnataka or Telungana because in those places people will be more friendly with officials speaking their language. Hence even if the area is highly potential for profit, the personal factor may either reduce profit or delay in generating profits.

I would consider segments also for fixing targets. All segments are not equally suitable for growth. While some segments are having high growth potential, some are not. Some segments are statutory and social obligations. For example loans to farmers are essential despite its low income generation due to low interest rate. In olden days one of the major segment for generating income other than interest income was remittances like bank drafts, mail transfers and telegraphic transfers. The advent of internet banking has now eliminated the necessity of these instruments by replacing them with internet based money transfers which are more efficient, quick and costless. Segments having high growth potential will help to generate more profits.

There is time factor also which has to be considered while fixing targets. The growth is seasonal as far as some business is concerned. For example building activities will be slow during monsoon season. The floods and landslides can affect the life of people staying in hill side. So targets for loans may not work out in such centers throughout the year. If loans are given to places which are more prone to wild animals’ attack, flood and natural calamities may ultimately become a loss making process since sometimes there would social pressure to write off such loans. But these loans cannot be exempted or avoided, but it is not advisable to consider these areas for achievement of profit targets.

Many times we fail to appreciate achievements, whether it is small or big. Appreciation encourages hard work for canvassing business. But often what happens is firing and penal action for non-achieving quarterly targets without looking at the reason for achievement and giving support and guidance for achievement in the next quarter. Support and guidance increases confidence and tries hard for becoming successful.

Targets are normally fixed for a branch or the organization. Individuals are only representatives for achieving targets. Hence it is not an individual’s only responsibility for working on targets. It should be a joint effort. Hence delegation is essential so that everyone will feel responsible for achieving the targets fixed for their branch. When targets are achieved, the appreciation should be given to all irrespective of size of achievement, but those contributing major efforts deserves special appreciation and rewards. In many banks they are felicitating best performer of the month in their branches by exhibiting the name of the performer with photograph in the branch and giving rewards. Another example of giving support and guidance by top management by organizing sales exhibitions and melas like the loan melas organized banks in which the head of the organization or head of the region also takes part.

Governments also give targets to their officials for collection of taxes as well as disposal of files. Here the achievement of targets enables the governments to increase the tax collection and meet achieve the budgeted revenue collection. However, threatening officials may also generate wide spread complaints from the general public. Targets for disposal of files enable taking quick decision making by officials and reduces complaints from general public. Hence targets can bring positive and negative results too.

However, I find that there are many instances where targets are fixed without considering these factors and the officials responsible for achieving targets are threatened with punitive action like transfer to remote places or demotion. It is like loading a bullock cart with logs beyond its capacity. While discussing about the pressure on individuals from top management for achieving targets, we cannot ignore the suicides or attempts of suicides happening or happened in this sector being unable to bear the threatening of punitive action or abuses. Definitely, life should have targets, but that should be for living and not for ending the life.