Cascading targets through a business

I’ve long been a fan of the CEO setting top level goals for a startup and then having those goals cascade down through the business with each function head setting more detailed goals for their department which in aggreagate add up to the CEO’s goals, and then each employee setting still more detailed individual goals which add to the goals set by their function head. I’ve found this to be a great way to make sure the whole company is pulling in the same direction, and to be particularly helpful when a company wants to quickly align around a new objective (typically fixing a pressing problem – e.g. if churn gets out of control).

In the fast moving world in which most startups live it is helpful to set these targets on a quarterly basis. Monthly doesn’t allow enough time to change behaviour and deliver against a target and too much changes within a year for that to be the right time period. There shouldn’t be too many targets, three or four per person is a good number. For the CEO and overall company these will typically include something related to traction (usually revenue), a tech/engineering objective, a marekting objective and an operations or customer focused objective.

Objectives should be SMART. If you don’t know what that means go read the link. It’s important.

Around a year or so ago it became popular to make these targets very aspirational, i.e. to set them so high that getting two thirds of the way there would be a good result. I’m sure that can be made to work, but my experience across a couple of companies now has been that aspirational targets are more confusing than helpful. The value of targets is that they bring clarity and accoutability, and there is more clarity and accountability with a single number that should be beaten than when there is a range of acceptable outcomes. This will end up with lower aspirations in the short term, and occasionally that might result in smaller outcomes, but in my opinion this risk is more than offset by the benefits that come from absolute clarity. I’d be interested to hear from anybody with a different experience.

Running a business with cascading targets renewed every quarter takes discipline. It takes time to come up with targets that are meaningful and it takes a concerted effort to make sure that missing matters, but matters the right amount. Without these disciplines setting targets does more harm than good.