Have you ever been in a situation where everyone was pushing in the same direction and you were able to move mountains? It's OK if you haven't; most companies have a hard time setting clear and effective goals. I want to shed light on how you can create this kind of environment in your company.
After clarifying some of the key terminology of goal-setting in my previous post, we are now ready to discuss some best practices for goal-setting. This post summarizes best practices that I wish I had known when I implemented goal-setting processes at my previous start-ups, and best practices that I wish my leadership teams knew about goal-setting when I was an individual contributor at the tech companies where I worked earlier in my career.
One of the most valuable things that a leader can do in defining goals is to provide their teams with the gift of focus. Early-stage start-ups should typically aim for only one or two company-level Objectives. Know that company objectives are not meant to represent all the work that the company must do, but rather they are the most important areas to “nail” in the period. Not every team will be focused on the company objectives, but everyone should prioritize their support of the company objective above any other projects they will work on.
If there is more than one company objective then clarify which is the higher priority. In one of my past roles, we had a company objective that was mostly driven by the Go-To-Market teams (e.g. Marketing, Sales, Business Development) and another objective that was mostly driven by the EPD teams (Engineering, Product, and Design). Each time a tradeoff needed to be made between the teams it led to discontent and required CEO intervention to make a decision. Clarifying the priority upfront or, better yet, ruthlessly prioritizing a single company objective, would have prevented this.
If you find it impossible to leave off a topic from your company objectives, consider using the tool of Health Metrics to alleviate your concern. But only use this tool judiciously; too many health metrics with overload your teams’ ability to deliver on the main goals.
Another way leaders should focus is to be specific with company objectives. For early-stage start-ups, open-ended company objectives such as “Increase revenue” or “Improve customer retention” keep the problem space too broad and don’t really provide useful guidance to teams. A leader’s role is to have insight about the core problem or core business need and then to be as specific as possible (without being overly specific). Here are two examples of quarterly company objectives that I’ve used in the past: “Deliver a successful launch of our new rebrand” and “Regain trust with our users”, both of which I think provided the right level of specificity for the situation.
With the company objective(s) in place, leaders can work with their teams to define ideally one objective per team with 2-3 KRs (Key Results) per objective. The range of 3-5 KRs is commonly recommended and probably works better for larger teams and organizations, but I’ve found 2-3 is the sweet spot for smaller start-up teams (with an additional 1-2 health metrics if needed).
As discussed in the previous post, KRs should specify Targets of measurable business value. “Acquire 100 new customers” is a measurable business value. “Launch new marketing campaign” is neither measurable (since “launch” is not explicit) nor does it provide business value (since the launch is an activity and the value only comes from the results of the campaign). You can read more about value-based vs. activity-based targets here. Targets with numbers or percentages are best because you can distinguish between a near miss and a complete miss. If you cannot measure your target with numbers, then at least choose a target that is easy and clear for everyone to make a Yes/No evaluation at the time of the deadline.
I like to sanity check whether my KRs actually drive my objective by asking “What situations can I imagine where all the KRs are met but we didn’t really achieve the objective?”. This line of questioning can often tease out some missing elements of the KRs.
A common challenge with KRs is that teams will have a big project that they plan to launch by the end of the period but there won’t be time remaining to demonstrate the desired impact. In these cases, don’t fall into the trap of measuring your target in the next period; it will just be forgotten. Instead, focus on what business value is most important and measurable within the period. Consider KRs like these: “Earn a 40+ pt. NPS score from beta users”, “8 out of 10 customers interviewed say this feature would be a huge benefit to them”, “Launch generally-available version and have first 50 customers on the new product”. These examples are more closely tied to business value that can be demonstrated in the period.
It’s unfortunately all too common to come across a goal that looks good at first glance but after the team is questioned it becomes clear that there is no agreed definition for the Metric, the Baseline hasn’t been measured, and/or there isn’t consensus on what the target actually means.
“If you don't know where you are going, you might wind up someplace else.” — Lawrence Peter "Yogi" Berra, The Wisdom-ism of Yogi-ism
Let’s look at the following KR:
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