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Based on my experience, setting unrealistic targets can really demotivate team members. They'll be working hard but are not able to achieve the set target. In the report you also need to always justify why you were not able to achieve the target. I therefore support the idea of setting ambitious but realistic targets. Everyone will feel motivated to see the targets being achieved.
This is so true @Grace-25_4. Even in our daily lives, if you have things you have set to accomplish and you fail in the specified period of time laid, it will demotivate you. An it is always satisfying after achieving targets, it will give you the urge to set out new ones.