Making goals bottom-up - Moving from stage 2 to stage 3

We've seen previously how you can kickstart goal-tracking in your company with top-down goal-setting. In this post we'll see how you can get your team to participate in the definition of success.

Right now you should:

• Be familiar with the 4 stages of goal-tracking.
• Have a vision document that clearly outlines what your purpose is and the main focus areas for the upcoming year.
• Be able to track events and KPIs.
• Have a set of company goals driven by leadership.

Moving from stage 2 to stage 3 is about creating ways for your team to contribute to the goal-setting part. Ownership of the future is shared, and it is a great way to lift morale and increase engagement.

1. Get familiar with SMART goals

You need first to agree on what a good goal looks like before letting everyone write their own goals. Luckily, there are a few methodologies and framework that you can use. One of them is the SMART model which stands for:

• Specific
• Measurable
• Attainable
• Relevant
• Time-bound

Let's dive in to see what each of these terms mean.

Specific

• Not specific: Get more users.
• Specific: Increase the number of accounts of 1000+ employees by 20%
• Too specific: Get Coca-cola and Nike to sign up.

Good goals should help people know what to focus on. So they should be specific enough that someone can look at it and design an effective strategy or a good set of projects to execute.

Be careful not to go into too many details though. A goal should allow your team to get creative with the solution. If your end goal is to have more customers, then limit your options to a few selected leads.

Measurable

• Not measurable: Increase satisfaction.
• Measurable: Keep our Net Promoter Score above 40.

If you can't track progress on your goals, it won't be possible to know if you're successful or not. That's why one of the requirement to switch to an outcome-driven culture is to have few tools like Google Analytics or Mixpanel to help you measure things.

There will be times when setting measurable goals is hard, especially for Engineering teams that work on large projects. In this case, I would recommend dividing large features into smaller deliverables with milestones.

What's important is that you avoid binary goals (done or not done) as they're more akin to tasks. In the worst case, you should at least be able to track sentiment (on-track, at-risk, off-track), but try your best to have a way to track progress over time as sentiment by itself can be hard to trust.

Attainable

• Not attainable: Learn to bake 12,000 different cakes by next month.
• Attainable: Publish 4 different cakes recipes by next month.
• Too attainable: Buy 6 packs of cookies by next month.

If you shoot for the moon, you'll land among the stars.

While the quote above sounds great, it's a dangerous approach if you want to keep your team motivated. It supposes that we're very good at looking back and considering how far we've gone. But in reality, we're much, much, muuuuch better at seeing what we haven't accomplished and feeling let down in the process.

Help your team set goals that are within reach. Yes, you can push for a stretch, but you'll create better momentum by having some victories to celebrate than by always falling short of meeting your targets.

Relevant

(If you're selling sports shoes online)

• Not relevant: Sponsor 4 software developer conferences.
• Relevant: Sponsor 4 sports podcasts.

It sounds obvious that goals should relate to the outcomes that you want for your business. But it's really easy to set goals that produce unwanted results.

Here's a more subtle example. Let's say that you want to get more users for your product. If you just say "Increase users by 30%" you might end up having 30% more active users as expected - good. But you might also see your team buying a lot of traffic to compensate for poor conversion, and acquire new users that won't stay - bad. A better goal would have been "Increase retention by 20%" as it will drive the point that you do not want bad signups.

Sometimes the easiest way to solve this kind of side-effects will be a combination of goals. Just make sure that when looked at together, they positively impact your business.

Time-bound

• Not time-bound: Increase monthly recurring revenues (MRR) by $100,000.
• Time-bound: Increase MRR by $100,000 next quarter.

Always have a deadline for your goals. The value of doing something is entirely tied to the time factor. Shipping a small feature can be worth doing if it takes you a couple of days. But if it becomes a couple of months, then it's not small anymore and you should reconsider its value.

The efforts required to achieve something will be drastically different if you allocate 1 week, 1 month or 1 year. So choose a time-frame for your goals to put things into perspective.

2. Let each team come up with 2/3 goals for the quarter.

It's time now for your teams to decide what outcomes will be relevant for them in the next 3 months.

There should be 3-5 company goals for the quarter that people can refer to. Let's say that one of your company goals is to increase conversions. And let's assume that you have a Marketing, Product and Customer Success teams. Here's how your goals can look like:

Company goal: Increase active users by 20% by the end of the quarter
    |- Marketing goal: Increase signup conversions by 30%
    |- Product goal: Drive in-product referrals up by 30%
    |- Customer success: Conduct 20 exit interviews to understand churn

Each team can figure out a way to contribute to the top-level goal by focusing on their strength. Not everything needs to move a KPI necessarily, but it should put the company in a better position.

It will take a few iterations to get things right so here are a few tips to make things easier:

• Block time to set the goals. You're all busy putting fires out. But block at least half-a-day per quarter to do some workshops. I recommend doing 4x1h to have time to digest things rather than doing one big session. Remember, these goals will drive all your efforts for the next 12 weeks so it's worth taking a break to think them through.
• It's more important to be aligned first. Don't dwell too much on the targets - it's going to be wrong the first time you set it anyway. Spend more time on picking the right metrics, less on doing maths to predict what the expected result should be.
• Don't be too strict on cascading everything. If the team understands what the focus should be then 80% of the job is done. It's okay if there's a goal that doesn't directly relate to a top-level goal as it can be hard for some teams to move the needle directly. Your Support team will have a hard time affecting conversions, but they can definitely help with retention.
• Do not link goals to bonuses. If there's a financial incentive tied to the team goals you're likely to see very-attainable-goals™ popping up, as well as having some very-dissatisfied-team-members™. Asking your team to set goals that will be tied to their salary is a dangerous thing to do.

3. Review progress every month

Now that your goals are set you can start tracking them. In stage 3 it's enough to look at progress once a month. The big issue that teams stumble upon at this stage is to agree on how reporting should be done. Keep things simple with a light card:

• Status: Are you on-track, at-risk or off-track?
• Current value: What's the current value of the metric and how far are you from completing your goal?
• Comment: You won't have to say much if you're on-track. But if you're at-risk or off-track, it's crucial to explain what happened as well as outlining a potential plan.

Do this every month and you'll increase accountability and transparency. Once again, you'll have to give people some wiggle room at the start. Having things off-track or at-risk should not be a punishable offense, but rather an occasion to learn as a group.

Empowering your team means that they should be allowed to make mistakes and improve over time.

4. Dip your toes in the Objectives Key Results (OKRs) model

You should run a couple of quarters with SMART goals coming from top-down and bottom-up before looking into OKRs. It'll take a bit of time to get comfortable with setting and tracking goals as a team, and switching to OKRs too early might add too much on your plate.

Here are some questions to consider to understand how comfortable you'll be with OKRs:

• Are people able to draft their own goals autonomously with minimum input from leadership?
• Are targets attainable? Do you manage to keep at least half of your goals on track?
• Do you have a consistent way to track and report progress?

If the answer is yes to these 3 questions, then it's time to look at OKRs.

The difference between SMART goals and OKRs is that SMART is a way to write down goals, and OKRs is a framework to organize them.

Objectives

Objectives should be concise, inspiring and engaging. An Objective can be something like "Delight customers", "Be a market leader in Europe" or "Create an amazing Ecosystem".

Objectives do not contain metrics. That's for Key Results. Another way to understand Objectives is to see them as focus areas for the upcoming year or quarter.

Key Results (KRs)

The Key Results are the ways you'll measure success for your Objectives. This is where being familiar with SMART goals comes in handy as they are similar things.

You should have 2 to 5 Key Results for each Objective. If you add more, you're likely to dilute efforts and lose focus as people will be trying to have an impact on too many things at the same time.

If your Objective is to "Create an amazing Ecosystem" then you could have the following "Key Results":

• Increase the number of integrations from X to Y
• Improve Ecosystem Net Promoter Score from X to Y
• Drive Marketplace revenues from X to Y

Make sure that your KRs are outcomes and not outputs. If you need to build a billing system to charge customers, then a KR for the Product team will be "Charge X customers" and not "Ship the billing system".

Make it easy first

If you read about OKRs you'll see that a recommendation is to have stretch goals where reaching 70% of your target is considered excellent, and 100% a rare thing.

I'd advise you to go against that approach at the beginning as it's generally confusing for the team. It's an odd thing to set targets that you're not supposed to get to, and different teams will have a different understanding of what stretch means.

So, keep your targets attainable and celebrate reaching 100%.

The second thing that you can do is to work on aligning your OKR rather than cascading them. It's a topic that we addressed before, but it's a recurring theme in the OKR literature. Trying to cascade every top-level OKR into team or department OKRs is costly and rigid. Instead, make sure that everyone has a solid understanding of what the company OKRs are, then let the bottom-ups OKRs flow as long as they align with them.

What's next?

In the next post will see how to become fully outcome-driven by adopting continuous feedback on goals and using that information to be more agile.

Check our tag #pragmaticgoals to see the entire series.

Add your feedback and questions in the comments, and you can find me on Twitter.

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