COST02-BP02: Implement goals and targets
Implement both cost and usage goals and targets for your workload. Goals provide direction and motivation for cost optimization efforts, while targets provide specific, measurable objectives that teams can work toward. Regular tracking and reporting against these goals and targets enables continuous improvement and accountability.
Implementation guidance
Effective cost governance requires clear, measurable goals and targets that align with business objectives and provide direction for optimization efforts. These goals should be specific, achievable, and regularly monitored to ensure progress and accountability.
Goal Setting Framework
SMART Goals: Establish goals that are Specific, Measurable, Achievable, Relevant, and Time-bound. This ensures clarity and enables effective tracking and accountability.
Hierarchical Structure: Create goals at multiple levels - organizational, business unit, project, and workload levels - ensuring alignment and cascading accountability throughout the organization.
Business Alignment: Ensure all cost and usage goals directly support broader business objectives such as profitability, growth, efficiency, or competitive positioning.
Stakeholder Involvement: Engage relevant stakeholders in goal setting to ensure buy-in, realistic expectations, and comprehensive coverage of all important aspects.
Types of Goals and Targets
Cost Reduction Goals: Specific targets for reducing overall costs or costs in particular areas, such as “Reduce compute costs by 15% over the next 12 months.”
Efficiency Targets: Goals focused on improving cost efficiency metrics, such as cost per transaction, cost per user, or cost per unit of business value delivered.
Usage Optimization Goals: Targets for improving resource utilization, such as achieving specific CPU utilization rates or reducing idle resources by a certain percentage.
Budget Adherence Targets: Goals for staying within allocated budgets and improving budget accuracy and predictability over time.
Goal Implementation Strategy
Baseline Establishment: Establish clear baselines for all metrics before setting improvement targets. Use historical data and current state analysis to create accurate starting points.
Progressive Targets: Set incremental targets that build toward larger objectives, allowing for learning and adjustment while maintaining momentum and motivation.
Resource Allocation: Ensure adequate resources (people, tools, time) are allocated to achieve the established goals and targets.
Accountability Assignment: Clearly assign ownership and accountability for each goal to specific individuals or teams, with defined roles and responsibilities.
AWS Services to Consider
Implementation Steps
1. Establish Baseline Metrics
- Collect historical cost and usage data for at least 3-6 months
- Analyze current performance across all relevant dimensions
- Identify seasonal patterns and business cycle impacts
- Document current state and performance benchmarks
2. Define Goal Categories and Metrics
- Determine which types of goals are most relevant to your organization
- Select specific metrics that will be used to measure progress
- Ensure metrics are actionable and can be influenced by team efforts
- Establish measurement frequency and reporting schedules
3. Set Specific Targets
- Use baseline data to set realistic but challenging targets
- Consider business growth projections and changing requirements
- Set both short-term (quarterly) and long-term (annual) targets
- Include stretch goals to encourage innovation and exceptional performance
4. Assign Ownership and Accountability
- Clearly assign responsibility for each goal to specific individuals or teams
- Define roles and responsibilities for goal achievement
- Establish escalation procedures for goals at risk
- Create incentive structures that align with goal achievement
5. Implement Monitoring and Reporting
- Set up automated monitoring and alerting for key metrics
- Create regular reporting schedules and formats
- Establish review meetings and governance processes
- Implement dashboard and visualization tools for stakeholder visibility
6. Create Action Plans
- Develop specific action plans for achieving each goal
- Identify required resources, tools, and capabilities
- Set milestones and checkpoints for progress tracking
- Plan for contingencies and alternative approaches
Goal Categories and Examples
Financial Goals
Total Cost Reduction: “Reduce overall AWS costs by 20% over the next 12 months while maintaining current service levels.”
Unit Cost Improvement: “Decrease cost per transaction by 15% through optimization and efficiency improvements.”
Budget Adherence: “Achieve 95% budget accuracy with actual costs within 5% of budgeted amounts.”
ROI Improvement: “Increase cloud ROI by 25% through better resource utilization and cost optimization.”
Operational Goals
Resource Utilization: “Achieve average CPU utilization of 70% across all production workloads.”
Waste Reduction: “Eliminate 90% of idle resources and unused services within 6 months.”
Right-sizing Achievement: “Right-size 80% of EC2 instances based on actual usage patterns.”
Reserved Instance Utilization: “Maintain 95% utilization rate for all Reserved Instance purchases.”
Efficiency Goals
Performance per Dollar: “Improve application performance by 30% while maintaining current cost levels.”
Automation Rate: “Automate 80% of cost optimization activities to reduce manual effort.”
Time to Value: “Reduce time from resource request to deployment by 50% through improved processes.”
Scaling Efficiency: “Achieve automatic scaling that maintains performance while minimizing costs.”
Business Alignment Goals
Revenue Efficiency: “Maintain cloud costs at less than 15% of total revenue.”
Customer Cost: “Reduce cost per customer by 25% through improved efficiency and scale.”
Market Competitiveness: “Achieve cost structure that enables competitive pricing in target markets.”
Innovation Investment: “Allocate 20% of cloud budget to innovation and new capability development.”
Goal Tracking and Measurement
Key Performance Indicators (KPIs)
Cost KPIs: Total costs, cost trends, cost per unit metrics, budget variance, and cost allocation accuracy.
Usage KPIs: Resource utilization rates, capacity planning accuracy, waste metrics, and efficiency ratios.
Business KPIs: Cost as percentage of revenue, cost per customer, ROI metrics, and business value delivered per dollar spent.
Operational KPIs: Goal achievement rates, time to resolution for cost issues, automation coverage, and process efficiency metrics.
Measurement Frequency
Real-time Monitoring: Critical metrics that require immediate attention, such as budget overruns or service outages affecting costs.
Daily Tracking: Operational metrics like resource utilization, spending rates, and performance indicators.
Weekly Reviews: Progress toward short-term goals, trend analysis, and identification of issues requiring attention.
Monthly Assessments: Comprehensive goal progress reviews, budget performance analysis, and strategic adjustments.
Quarterly Evaluations: Major goal achievement assessment, target adjustments, and strategic planning updates.
Reporting and Communication
Executive Dashboards: High-level summaries of goal progress for senior leadership, focusing on business impact and strategic alignment.
Operational Reports: Detailed metrics and analysis for teams responsible for goal achievement, including specific recommendations and action items.
Stakeholder Updates: Regular communication to all relevant stakeholders about progress, challenges, and successes in goal achievement.
Exception Reports: Immediate notification when goals are at risk or when significant deviations from targets are detected.
Goal Management Best Practices
Regular Review and Adjustment
- Conduct monthly reviews of goal progress and quarterly assessments of goal relevance
- Adjust targets based on changing business conditions and lessons learned
- Celebrate achievements and learn from missed targets
- Continuously refine measurement methods and reporting processes
Stakeholder Engagement
- Involve stakeholders in goal setting and regular reviews
- Provide clear communication about goal rationale and progress
- Gather feedback on goal relevance and achievability
- Ensure goals remain aligned with business priorities
Continuous Improvement
- Use goal achievement data to improve future goal setting
- Identify and address systemic barriers to goal achievement
- Share best practices across teams and organizations
- Evolve goals to reflect organizational maturity and capabilities
Risk Management
- Identify risks that could prevent goal achievement
- Develop mitigation strategies for high-probability risks
- Monitor leading indicators that predict goal achievement likelihood
- Have contingency plans for goals that are significantly off track
Common Challenges and Solutions
Challenge: Setting Unrealistic Goals
Solution: Use historical data and benchmarking to set achievable targets. Start with modest goals and increase ambition as capabilities improve. Involve teams in goal setting to ensure buy-in and realistic expectations.
Challenge: Lack of Visibility into Progress
Solution: Implement comprehensive monitoring and reporting systems. Create dashboards that provide real-time visibility into goal progress. Establish regular review meetings and communication processes.
Challenge: Goals Not Aligned with Business Priorities
Solution: Ensure all goals directly support business objectives. Involve business stakeholders in goal setting. Regularly review and adjust goals based on changing business priorities.
Challenge: Insufficient Resources to Achieve Goals
Solution: Ensure adequate resources are allocated to goal achievement. Prioritize goals based on business impact. Consider phased approaches that build capabilities over time.
Challenge: Goals Becoming Outdated
Solution: Establish regular review cycles for goal relevance and adjustment. Monitor business and technology changes that might affect goals. Create processes for rapid goal updates when needed.
Integration with Business Processes
Budget Planning Integration
- Align cost goals with annual budget planning processes
- Use goal achievement data to inform future budget allocations
- Ensure goals support overall financial planning objectives
- Create feedback loops between goal performance and budget adjustments
Performance Management Integration
- Include cost goal achievement in individual and team performance evaluations
- Create incentive structures that reward goal achievement
- Provide recognition and rewards for exceptional goal performance
- Use goal achievement data for career development and promotion decisions
Strategic Planning Integration
- Ensure cost goals support overall business strategy
- Use goal achievement data to inform strategic planning decisions
- Align goal timelines with strategic planning cycles
- Create connections between cost goals and business outcome goals