We examine how firms balance the relative importance of financial and nonfinancial performance measures in their annual bonus plans. We present a theoretical model showing that managerial allocation of effort is a function of both relative incentive weights and the difficulty of performance targets. We find that relative incentive weight and target difficulty can be either complements or substitutes in motivating effort depending on the extent to which managers have alternative employment opportunities. We use survey data on the choice of performance targets in 1,217 companies to test the predictions of our model. Consistent with the model, we find that when firms are greatly concerned about managerial retention, relative incentive weights are negatively associated with perceived target difficulty. Conversely, when retention concerns are low, relative incentive weights are positively associated with target difficulty. Combined, our study extends prior work by highlighting the importance of balancing target difficulty when designing performance measurement systems.