In our latest installment of guides in the Human Capital series, we’re focusing on the People Systems that ensure high performance—especially in the midst of change, uncertainty, and ambiguity. We began with a guide on setting up an effective manager system.Now it’s time to zero in on the key practices that let growing companies set org-level, team-level, and individual-level goals that drive success. Across the entire spectrum of People-focused tools, systems, and processes, we still don’t know of a better way to drive performance than to set clear goals and give developmental feedback against those objectives. We’ll talk about the first half of that equation today.

‍In this guide, we’ll cover:

1. Why companies need goals
2. 3 ways to set goals
3. Takeaways & next steps

Not only are goals valuable in and of themselves, they also let your organization build a cohesive, self-reinforcing performance enablement system.

In any rapidly scaling startup, there will be far more work to do than people do it. Everything seems equally urgent and important. And the people most attracted to early-stage companies are those who love doing anything and everything. The result? Just when time and resources are most scarce, young companies waste them by trying to do everything all at once.

So, how can companies ensure that the most mission-critical work gets done first and done well? The simplest solution is to create a practice and culture of goal setting. Here’s why:

Strategy: To quote Lewis Carroll: “If you don’t know where you’re going, any road will get you there.” This is how life feels within a startup without goals: lots of people running (really fast) in lots of incompatible directions. Once a company has goals, a thoughtful strategy can follow. Goals tell us where we want to go. A strategy answers how we’ll get there.

Prioritization: Even with a clear strategy, it can be difficult to decide which tasks, meetings, and conversations are worth our time—especially when we’re in the midst of them. Goals unlock the power of prioritization.

Goals answer the question: “If we can’t do everything, what is most important to do—right now?”

When we don’t pause to ask this question, we tend to be chronically busy but not meaningfully productive. For teams where employees must decide between multiple projects, initiatives, meetings at any one time—which describes almost every single startup we’ve ever worked with—having a roadmap for forcing prioritization; knowing “what is most important at this particular moment” can be invaluable.

‍Measurement: Armed with clear goals, we can consistently measure whether we are on track. Imagine flying an airplane with no information to tell you where you are, relative to where you want to be. Navigating would be impossible. In the same way, companies, teams, and individuals need metrics to assess and guide their actions.

‍Accountability: Measurable goals also make accountability simple. They make implicit expectations about success explicit. In this way, employees have the tools to hold themselves and each other accountable to their commitments. Performance assessment becomes a meaningful conversation when goals are at the foundation. Without goals, any evaluation of success is purely subjective. We’ve talked in the past about the necessity of feedback for a healthy and high-performing culture. Having goals in place creates the basis to give feedback against. Without it, feedback can be nebulous and not anchored to actual expectations.

‍Learning: Goals are especially important if you aim to build a nimble, rapid-learning organization. In this type of ecosystem, goals provide the unit of measurement that employees give one another feedback on. In a learning culture, people regularly set hypotheses about how they’ll achieve their goals, measure their outcomes, and swiftly adjust based on their learnings.

‍Motivation: Last but not least, goals give people something specific to attain, providing purpose and progress. To paraphrase Friedrich Nietzsche, “People who have a why can bear almost any how.” A sense of meaning serves as a vital buffer against the stress and strain of startup life.

Once you’ve committed to being a goal-driven organization, the next (and most important!) step is setting goals well. One of the biggest mistakes we’ve seen early-stage companies make is to be so focused just on having goals and metrics while forgetting why they have them—overemphasizing the process over the outcome. Below are the different goal “levels” we recommend using, as well as pro tips on how to set them well, based on the most successful companies we’ve worked with:

Org-level goals

Org-level goals should answer these questions:

• “How will we know if we’re successful as an organization?”
• “What do we want everyone to prioritize?”

We recommend setting broad goals five years out (it’s okay if they are just a hypothesis), one year out, and every quarter. The broad time horizon helps set an ambitious vision for your organization that should align macro decisions. It’s very unlikely your company will be at the point you expect a half-decade out, but this can give a clearer roadmap to align values and prioritize objectives. This approach affords a balance of a long-term view along with short-term agility.

To set these goals, review your company vision and the gap between your vision and your present-day reality.

Ask your leadership team (or invite everyone in your company to weigh in): “What would we have to achieve in the next (five years/year/quarter) to stay on track in achieving our vision.

For best results, make these goals measurable. And pick goals that are challenging and exciting but realistic. Despite the popularity of stretch goals, the reality is that they tend to cause unnecessary stress and confusion. You can use a model like OKRs, SMART goals, or anything else that feels simple and useful for your team. Many companies use the terms “goals” and “OKRs” interchangeably here. We’ll primarily be using the former. As long as you’re building a process that supports prioritization, alignment, and feedback, the specific model is less important. Just be sure to choose something that feels simple and lightweight. There are many, many resources out there to help. We suggest reviewing a few of them, then picking one system and sticking with it for at least one year. You can always reflect on the process and make tweaks the next year.

One note of context: While having measurable goals is key (how else will you know if they’ve been achieved?), we also have found that for many early-stage companies, the prioritization and the communication benefits of setting goals far outweigh the benefits of perfect goal measurement. But ironically, most companies focus far more on the latter—spending the bulk of their time trying to measure goals to the decimal point rather than focusing on the broader conversation of what the goals are and why they matter. The pace of business acceleration is often happening so quickly in the early stages of a company’s life cycle that what is seen as important at one point in time may no longer be the case even a few months out. And so over-indexing on getting measurement just right—especially when it comes to performance assessment—can be fraught with peril.

Once you have a good idea of the goals that will be most useful, here comes the toughest but most important part: narrow your list! We recommend no more than two to five goals. As unnatural as this advice might seem when everything feels urgent, research shows that companies with fewer priorities consistently report higher revenue growth. A key benefit of goals is prioritization and focus, which becomes increasingly difficult as you have more of them!

Lastly, decide how you’ll keep your org-level goals transparent and easily accessible to every single person in the company. We recommend multiple communication channels such as onboarding, a weekly newsletter, and monthly “states of the business.”

Here is a sample org-level goal chart:

Team-level goals

Once org-level goals are clear, it becomes much, much easier for departments and teams to set their goals. But this point is where many organizations run into trouble. It’s common for companies to attempt a strict top-down waterfall of goals. This sounds great in theory but is too time-intensive and slow in practice.

Instead, ask leaders to work with their teams to identify what team-level progress will help achieve the org-level goals. They should be related, but should not necessarily have to be a direct cascade. More often than not, a top-down approach is too slow and restrictive.

For example, if the company’s goal is to increase revenue by 40%, the marketing team might set a goal of increasing leads by 60%, while the product team sets a goal of reducing bugs by 20%, and the L&D team sets a goal of 90% of employees passing sales training. In short, the team-level goals should answer these questions:

• “How will we know if we’re successful as a team?”
• “What do we want everyone on our team to prioritize?

At LifeLabs Learning, we’ve also found it helpful to share a Not Yet List to help people avoid the temptation of sneaking in additional priorities. In general, goals should help people say “no” a whole lot more often than they say “yes” (and feel good doing it).

Individual-level goals

Similarly to the relationship between org-level and team-level goals, individual-level goals don’t need to follow a perfect top-down waterfall pattern, but they should ultimately result in team and company success. Remember: the most important thing is that they prioritize the most important work that will lead to the overall biggest impact, and they help set a framework for providing developmental feedback to the employee.

Individual goals can be “evergreen”—meaning that they are consistent success metrics regardless of company or team goals. Or they can be timely—relating directly to company and team goals. And ideally, you’ll have a combination of both.

When setting individual goals, some good questions to ask include:

“What’s the purpose of this role?”

“How will we know that someone has achieved that purpose?”

“What’s the most meaningful progress or outcome this role can achieve to support our team-level and company-level goals?”

When possible, involve the directly impacted people in the process of goal-setting. We humans are far more likely to be motivated and successful in achieving results when we set our own goals. If that’s not possible (for example in the case of evergreen metrics that are the same for all roles), be sure to give people some autonomy in how they achieve their goals. Not every single stakeholder needs to be involved in setting company goals, but for individuals, it absolutely should be a collaborative process. The conversation between manager and employee should also include the work they are most excited to do and what will help develop them further.

When setting goals to help access performance, be sure to include outcome and input goals. While outcome goals help set a focus, they are often outside of people’s direct control. For example, a salesperson with a higher close rate isn’t necessarily higher performing than someone with a lower close rate. The variability might be the result of differences in clients or services. This is why input goals are so important. For example: completing projects on time, involving the right stakeholders, sending out X number of messages, or planning Y number of events.

Where possible, we also like to recommend including a mix of both personal and professional development goals. Development goals may often take a longer-term time horizon (like a year as opposed to a quarter). Including these goals as well can help maintain a learning and growth mindset for the team and company.

To find helpful input goals, ask: “What actions will likely result in the outcomes we want to achieve?”

And just as with company and team goals, be sure to select a very small number of goals. The most nimble organizations don’t let people waste time attempting to be great at everything all at once. Narrow the list of individual success metrics to just two to five.

Finally, make the individual goals visible and accessible. Add evergreen metrics into your role descriptions, and include any changing goals into one-on-one templates or other frequently used documents or systems.

Template: Role Descriptions

An effective pricing strategy will lead to a strong go-to-market hypothesis, but it must also be responsive to insights that you learn from being in market. There are three steps to creating a pricing strategy:

1. Understand your stakeholders, including their problems and motivations and their options for addressing each
2. Define your model by using all of the parameters to create rules that scale prices in proportion to your customers’ willingness to pay
3. Measure and optimize your model by defining your target metric and implementing a measurement strategy

Optimizing your pricing model provides a significant competitive advantage by allowing startups to capture more of the value that they create as revenue so that it can be reinvested into growth—but founders have to consider a dizzying number of inputs to craft a good model. There are many important factors on the customer side (including value vs. baseline, competitor alternatives) and the business side (costs to serve, growth loops).This guide can help founders organize their research and the most pertinent factors. Each business has unique considerations—some of which can’t be accounted for in a streamlined template—but we’re always available to help you apply insights from other companies to your unique challenges.

Resources we love

Growth at All Costs is Perilous — This is How to Scale Sales Sustainably learn more about how acquisition efficiency is measured and used to improve acquisition efficiency for Sales-led acquisition models.

Outcome Based Value Metrics Reduce Churn, Increase Revenue review the data that Profitwell collected on the efficacy of the three types of value metrics.

Whether you need help selecting partners for your financial tech stack or polishing the messaging in a press release for your new pricing, you can reach out to your investment lead or the Propulsion team.