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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.

  • Andrew Hall

    With a fixed interval between objectives, the temptation is to make the length business experiments match this interval, which risks slowing growth.

    For a small company, the target date for objectives should align to the end of your current experiment (up to a maximum of a few months).

    For example, Sumdog is currently running regular mathematics contests for thousands of schools in the US and UK during the autumn term, with clear aim of achieving a particular level of revenues by 30 November. This date was chosen because it was the earliest reasonable measurement point for this experiment.
    Is this a topic where CEOs and investors have slightly different outlooks? Do investors need simplicity?

  • http://www.theequitykicker.com brisbourne

    I was thinking about businesses that are post product market fit, if you are still experimenting then you are right, targets should match the experiment.
    Investors should want the same metrics as the business, which should be reduced to a simple dashboard.

  • neil_lewis

    Hey Nic

    I see targets as measurable and therefore deliverable. They must be realistic because the business will judge itself on its ability to achieve them.

    However, I treat goals as not deliverable! The goal is the aspiration, the dream, it is the fuel for motivation, it is the excitement that makes us believe that more than we can imagine is possible. So, if we set a goal and can then immediately develop a tangible plan to achieve it – the goal loses it flavour. It becomes a target.

    You can swap around the terminology if you wish, but all businesses need both – a dream and a yardstick. Keeping the two both alive and separate is important.

    br
    Neil

  • http://www.theequitykicker.com brisbourne

    Shouldn’t goals in the aspirational sense be long term? More like a mission?

  • neil_lewis

    yes, exactly Nic – mission or goals – need to be somewhere in the future – they guide what the business is about and what it aspires to be – but it can’t be used to manage the monthly cashflow. The major challenge we face in discussing targets, goals and missions – is that these terms are used by different people to mean different things. At the end of the day, each of us falls back to the terms we are comfortable – and that’s fine so long as the business has its long term goal or mission as well as short term (quarterly) deliverable targets.

  • http://www.theequitykicker.com brisbourne

    Not if the targets are constructed well.

  • http://twitter.com/colmmcgoldrick Colm McGoldrick

    One of the best reads I have had lately – This is exactly what i have been trying to accomplish during the past few months. Reasuring to know i’m on the right track. looking forward to your comments tomorrow @brisbourne:disqus #websummit

  • Kjell

    Good one. We do a toplevel workshop for two days every quarter. Then there are department workshops, which are derived from the company’s overall goals. These are also done once a quarter (for only one day) and end-up in a graphic department roadmap. Out of that we usually take around four to five goals that are part of the goal-agreement that is signed by each employee individually usually a few days after the workshop.

    However, all goals on the roadmap are expected to be reached, with specific focus on a few. There is a quick goals-check in every weekly jour fixe and people are urged to bring up issues or changes to the roadmap immediately when they come up, but latest one month before the quarter ends.

    The roadmap and goals are then reviewed at the end of the quarter or in the quarterly workshop as a starter.

    If goals have not been reached and that comes up only in the last meeting of the quarter, that’s a problem. But that rarely happens. Planning takes up some time, but it helps so much with the execution.

  • http://www.theequitykicker.com brisbourne

    Thanks Kjell. There’s an old cliche in the UK: the six Ps.
    Proper
    Planning
    Prevents
    Piss
    Poor
    Performance