In putting up a benchmark on a small team, what do you have to consider most: the dept target performance score or the staff capacity?

For me the best answer will be the target performance score because at the end of the day the performance will be the basis of the client of the company. Even you only have few staff and they can perform well, they are productive, definitely they will be able to help the growth of the company. Unlike you have a lot of staff but they are not performing, they will not be able to help your company. 

In my opinion both aspects neeed to be considered as the achievement of target performance score would depend upon the staff capacity whether they can achieve that target or need some assistance or retraining in order to get to the target performance score. Many a times I have seen through my career that managements who are not aware of the the actual capacity of their staff end up in in frustration at the ende of the day due to not achieving the target. In the first place if the target performance and the capacity of the team/staff is weighted and guaged properly and any deficiency or any re-enforcement required is managed initially then definitely the rsultant success rate would be much higher.

It will be a balance of both. Staff capacity will need to be assessed but it is also essential to make the staff aware of his/her role towards the target performance score. Make the staff an enabler and not just a doer with no visibility of the result.

I would put both with a weighing factor higher on performance.

Performance should always be key with the staff compared to capacity. You have to set set realistic targets for performance. As I have always found when staff are monitored with KPI they are more focused on their tasks and not other members.

Staff capacity should be considered when performance targets becomes impossible. To understand this you will need to have KPI's which will indicate you the performance levels are on peak value but targets could not be reached as more manpower needed to achieve the targets. As constant higher performance demands could  bring stress & strain both should be evaluated regularly. 

Both factors need to be considered carefully as they contribute to your KPI directly.

Prepare the job matrix of your staff.

Identify their skills.

Identify the training needs for your associates and provide training accordingly.

When your team is small, make sure that all your associates are multiskilled, otherwise you will not be able to control the team and accomplish the tasks and there will be a big void if an associate resigns abruptly.

Appreciate, motivate, upgrade and incentivise your associates accordingly.

Provide them proper tooling to perform.

Be reasonable, flexible and recognise their efforts. Win their trust and confidence.

With the above in place, automatically the department target performance will be taken care of.

The target performance, even with a small team, the productivity of these staff based on numbers counts as a team effort, individual contributions are commulative in a team.

In this factor, both perspective are vital. 

The dept targets is the answer, because it is the objective. Capacity is just a constraint, constraints by nature can be manipulated in different ways.

Management theory and practice have long established a link between effective performance measures and effective management. The effectiveness of any given performance measure depends on how it will be used. For performance measures to have meaning and provide useful information, it is necessary to make comparisons. The comparisons may evaluate progress in achieving given goals or targets, assess trends in performance over time, or weigh the performance of one organization against another.

I think we should consider both of them because if you know the capacity of your team and they didn't seek development so the target performance score will be the same