Unlocking the Hidden Benefits of Goal Setting

How to maximize your company’s potential with effective goal-setting strategies

As we near the halfway point of 2023, it’s a great time to assess your company’s progress toward its objectives. Goals – the articulated intentions of a company to do something impactful – are fundamental to strategy and planning. However, setting the right goals can be a tricky exercise, especially for early-stage companies in an ever-evolving world.

Maybe you started the year at full sprint and didn’t have time to set goals or conduct comprehensive planning with your team. As a result, you may be spending a lot of time coordinating work and aligning priorities on an ad-hoc basis. Or maybe your company did enter the year with goals, but you’ve learned a lot over the past few months and found that some of those goals don’t feel like the appropriate targets anymore.

Whatever your situation may be, this article will serve as a guide and help you set clear targets for the remainder of the year and beyond. When you’re on the right track, you’ll find that effective goal-setting can benefit your company in ways you didn’t think possible.

Why Are Goals Important?

Goals are critical for a number of reasons, most obviously as a way to clarify the team's efforts and evaluate progress. These are important factors — but there are two (sorry, rule of three people!) additional reasons that are less obvious but equally important that I want to dig into.

When you set clear, effective goals, you will:

Empower your team
Make your company more flexible

Sound too good to be true? I promise, this is attainable. Let me explain.

Empowering Your Team

As an early-stage company expands beyond its close-knit founding team, maintaining alignment can be challenging. Teams will start forming their own identities and perspectives on team-specific goals and incentives, which can sometimes be at odds with the broader goals of the company. To address this challenge, it’s important to define and prioritize goals that everyone can rally around. When goals are well-defined, teams are better able to make decisions and take action on their own, without constantly seeking guidance from their leaders.

A large team I led at Medallia lacked clear, prioritized goals that resulted in confusion, inefficiency, and conflict. Team leaders felt the need to check in with me for basic decisions, like whether to take a customer to dinner or have a team lunch. They were certainly not comfortable making decisions on more contentious topics like staffing ratios that impacted other teams.

This inability to make decisions was a huge tax on my time, and it was a warning sign that the team did not feel empowered. So the team leads and I spent a day developing our strategy and prioritizing our goals to reflect it — here’s what that prioritization looked like:

Maintain employee net promoter score (eNPS) of XX
Increase customer net promoter score (NPS) to XX
Grow annual recurring revenue (ARR) by XX%
Improve gross margin to XX%

We knew the team had a very high-ownership, never-say-no, customer-obsessed culture, so we intentionally prioritized eNPS to reduce the risk of people working themselves to oblivion. If teammates were happy, they were taking good care of customers. Happy and satisfied customers spent more, ultimately improving revenue and margins. While other teams may have prioritized these goals in other ways, this approach worked for us and served as a sustainable model for growth and profitability.

With goals declared and ranked, answers to many important questions started coming naturally. Teammates made basic decisions with ease, like whether to take a client or the team out. Better yet, having a shared set of objectives meant they could have productive discussions about trade-offs. For instance, when our engagement management team made a request to our technical team for a higher staffing allocation, the technical leads initially disagreed because it would hurt our margins. After the engagement team explained that their project was short-staffed and this posed a risk to both the team and the customer for a major upcoming launch, the technical leads understood how it fit into our priorities and approved the request – all while I was in another meeting. Huzzah!

Aditi Shekar, the co-founder and CEO of Zeta, experienced a similar outcome. “When you’re building in the early days, every decision anyone on the team makes has the potential to have lasting effects on the business. To make sure we always empower our team to make those decisions — rather than running them through the founders or CEO — we are crystal clear about the quarterly and annual goals we’re gunning for.” By empowering her team, she found they were able to move more quickly and confidently.

Increasing Flexibility

You may be scratching your head on this one. Many early-stage companies don’t think they can lock their teams into long-term goals. The good news is — I’m not asking you to! I have set goals and then needed to abandon or change the targets because we learned something new at multiple companies, and I encourage our founders to do the same. Tracking progress against goals not only helps teams reach their objectives, but also helps leaders recognize when they need to reassess strategy and how to change course. Instead of goals making the team more rigid, outcome-based goals make the team more flexible.

To get the benefit of this superpower, set outcome-based vs. activity-based goals. Not sure what the difference is?

Activity-based goals focus on specific actions or tasks that need to be completed. Examples of these could be “ship a specific feature” or “sign a certain customer.” You could easily learn something along the way – like identifying a more important feature, or the price at which a customer is willing to sign – that tells you that activity is no longer the most important or even the right thing for you to do.
Outcome-based goals focus on the end result that you want to achieve. Examples of these include “increase revenue by 20%,” “improve customer satisfaction ratings by 10%,” or “reduce product defects by 50%.” By focusing on the end goal and being open to adjusting your approach as needed, you can increase your chances of success and achieve better outcomes in the long run.

Allie Fleder, the COO and co-founder of SimplyWise, found this to be true. “In the early days of the SimplyWise app, we struggled with long-term product roadmapping. We didn’t want to be rigidly committed to a certain feature set; it felt antithetical to being data- and customer-driven.” Instead, the SimplyWise team learned to develop an outcome-based roadmap that freed them to think creatively about how to achieve their desired business goals.

Take a second to think about your goals – are they mostly activity based? Don’t discard them just yet. They can help you discover the intended outcomes you need to establish outcome-based goals. For example, solving specific bug fixes are activities, but your outcome is likely to improve product defects or customer satisfaction. Activities are the foundation for your action plan to achieve your outcome. And if they’re not driving results, change them! This is why outcome-based goals allow for greater flexibility. They keep your teams aligned on outcomes, while giving them the ability to explore the way to get there – the activities.

Now you know why goals are important, but how do you set them well to achieve the potential benefits? Read on.

The Goal-Setting Hokey Pokey

The best way I have seen companies establish goals is a bit of dance: first top-down, then bottom-up, and finally side-to-side.

Let’s dive into what this really looks like.

Step 1 (Top-Down): Setting the North Star & Company-Wide Goals

The North Star:

As its name implies, the North Star metric provides persistent direction for a company. It shouldn’t change unless your product offering or mission fundamentally shifts. The North Star should align with your best proxy for the impact you are having on your customers and typically represents “success” in using your product. Airbnb uses number of nights booked, Spotify uses time spent listening, and Twilio uses number of messages sent.

Some examples of North Star metrics from within the Deciens portfolio:

Zeta uses number of customers who consistently fund their account. “We chose this metric for two reasons,” Aditi Shekar explains. “It helps us understand the stickiness of our product and also serves as a predictor of revenue regardless of the ways we choose to monetize. It’s been a great way to keep the team focused on what actually matters.”
Whym uses products remembered for shoppers. “It helps us understand ‘how much’ and ‘how often’ we are contributing value to the end-user,” says Kelly Nyland, the CEO and co-founder of Whym. “Both are indicators of stickiness and velocity when it comes to data sharing and collection. We intentionally use the word ‘remember,’ which implies data storage and memory, and the word ‘shopper,’ which defines the end user as a high-intent buyer. This approach has effectively kept our team focused on key priorities.”

While financial metrics can serve as effective company-wide or cross-functional goals (which I’ll get into later), I typically push teams away from using revenue, margin, or other core financial metrics as North Stars. A user-, customer-, or mission-focused goal tends to be more inspiring. Focusing on financial metrics tends to create incentives for short-term trade-offs that can harm that company’s long-term success.

Company-Wide Goals:

Once you’ve set a long-term beacon in a North Star, you’ll want to set three to four company-wide and, very often, cross-functional goals. The litmus test here is that if they are achieved, you’ll make meaningful progress on your North Star metric.

There is a LOT of content that tells you how to set good goals at this level. For earlier-stage companies, I like the Narrative, Commitment, Tasks (NCT) framework. A great write-up of it is in Reforge’s post on goal setting. If you’re a fan of objectives and key results (OKRs), Google’s ReWork project has one of the most comprehensive how-to guides for OKRs. I won’t rehash all of that here, but I have found a few behaviors that really help:

Make sure your goals are SMART (specific, measurable, achievable, relevant, and time-bound). Atlassian has a good, succinct post on this, including some additional templates.
Target outcomes, not activities. Outcomes are “what you want” instead of “how you will do it.” Set a high-level objective and empower the team to figure out which of the multiple paths to take to get there.
Prioritize your goals. Insufficient resources (time, money, staff, focus, etc.) often make goals overly ambitious for early-stage companies, leading to conflicting priorities. To avoid this, companies should prioritize goals based on importance, urgency, and intended behavior.

Step 2 (Bottom-Up): Draft Functional Goals

Once the cross-functional goals are set and communicated, functional teams need to develop a first draft of function-level goals and create a plan to achieve them. The same frameworks from above are helpful: NCT, OKRs, and SMART goals.

This mid-level planning is the core of how the company-wide goals are split into workstreams. Setting functional goals requires allocating each team’s resources and planning specific activities. For example, if your company-wide goal is to improve retention by 10% quarter over quarter, some functional goals that support this might be:

Product: Ship the five most requested features by at-risk customers
Support: Achieve 100% service level agreement (SLA) attainment for at-risk customers
Marketing: Run campaigns that drive 80% of customers to engage with product
Engineering: Maintain 99.999% uptime

Frequently, there are also cross-functional implications of these plans that emerge from the planning process. For example, sales or customer success may count on marketing and product to launch specific features in order to hit revenue and customer satisfaction measures. Similarly, product and engineering may need customer success to help find beta customers to progress current development.

Once you’ve created these cross-functional needs, you’re ready for the next step.

Step 3 (Side-to-Side): Incorporate Cross-Functional Needs

A major barrier to creating effective goals is setting them in a silo — that is why this step is critical. If you stop at Step 2, you may miss the opportunity to achieve company-wide goals through more effective collaboration. Your North Star and company-wide goals allow your functional leaders to develop a collaborative set of functional goals that share resources in pursuit of the company targets. It’s totally OK if functional goals evolve during this phase – it’s why we consider Step 2 a draft.

Collaborating for Efficiency:

Before you’re ready to finalize your functional goals, it’s crucial that each functional leader understands what support they need to provide to other teams and what support they need from other teams to hit their goals.

Using the example above, the support team may be struggling to hit its SLA because there are a number of bugs that are driving high, unresolved ticket load. Engineering is promising 99.999% uptime, but not planning to address these bugs. Left in a silo, the support team will likely either work overtime or hire more agents. But by working together, they could identify a more efficient goal for the engineering team. The revision could look something like this:

Engineering: Maintain 99.999% uptime. Resolve the top 10 user-reported bugs each month.

Coordinated goals are more powerful and have a higher chance of success than those set unilaterally.

Avoiding Competition:

Alignment is key, and fostering competition between teams will impede it. For this reason, especially in early-stage companies, I don’t recommend trying to engineer competition between teams. The more powerful function typically hits its goals while others struggle with the effects of that team’s self-interest. Are any of these situations familiar to you?

Sales hits revenue, but customer and product teams suffer from selling ahead.
Product ships early to hit deadlines, but support gets slammed because features and docs are missing.
Recruiting spends all of its time supporting sales and engineering, but other teams are short-staffed.

The result? Every team finds that the goals are unattainable because they are in conflict with each other in terms of priorities, resources, or both. Under-resourced teams are demoralized by their inability to hit these goals, and optimize for the high-level metrics that relate only to their own organization, using whatever resources they have available. Over-resourced teams easily surpass their goals, creating a disparity in outcomes that fosters distrust and a competitive culture rather than a collaborative one. This happens more often than anyone is willing to admit, and is likely why so many seem to hate goal setting.

Collaborative, company-wide goals help organizations avoid functional turf battles and allocate resources efficiently.

Operationalizing Your Goals

You can do a great job setting goals, but it is not a “set it and forget it” exercise. You will need to communicate your goals effectively to the broader team, then establish a process to check progress and ensure you are sharing what you’re learning along the way. Here’s what that entails:

Rolling Out Goals

I typically suggest a combination of a strategy document, presentation, or all-hands meeting as a communication medium. The purpose should be to include the context on why these are the most important goals for the organization in addition to just the specific measurable targets. This may include information on how the market you operate in has changed, how the fundraising environment has evolved, or your own data on how customers are behaving.

Creating time and space to provide this additional context ensures teams understand the WHY behind the goals so that they can execute them more effectively and be on the lookout for information that may cause these goals to change or be revisited.

Effective Goal Check-Ins

Ongoing engagement with goals beyond their initial roll-out is the key to driving outcomes. Chander Chawla, the chief product officer at Therma, underscores the importance of incorporating goals into your operating rhythm after you’ve set them. “We track our progress on key indicators on a weekly basis to ensure that our employees in four countries are unified behind the company goals and understand our progress towards them at all times.” I ran similar weekly metrics reviews with all of my past leadership teams for the same reasons.

You MUST review your goals regularly, highlighting the wins as well as the areas of improvement. This could be a simple monthly email with key metrics and thoughts, or a review in an all-hands meeting to check in on goals.

Zeta, for example, accomplishes this through a quarterly planning meeting. “It’s been a powerful tool to help us reiterate our goals and, if there are any changes, map our progress against them, and help each team build a roadmap to help us get there,” says Aditi Shekar. “Even though this session is typically 2.5 hours, it has consistently been rated above 4.5/5 stars across the team!”

Your ability to share progress and what you’ve learned with the rest of the company gives you the transformational powers of good goal-setting.

Summing Up

In the wise words of the famous French author, Antoine de Saint-Exupéry, “A goal without a plan is just a wish.” Don’t just wish upon your North Star. What are the most important steps you need to take to get there? You can’t expect your team to know or understand the path forward without a roadmap.

While it’s common knowledge that setting long-term goals can help clarify a team’s efforts and measure progress, the true power comes from establishing effective, outcome-based goals with intention, collaboration, and thoughtful communication. Doing this right will empower your team and foster flexibility – freeing leaders to focus on the bigger picture and propel your company forward.

So, why not try our “Hokey Pokey” approach to goal setting and unlock your company's full potential? The benefits will be well worth the effort.