Leading or Lagging: A Playbook for Goal Setting That Works
Denise Conroy
Coach & Advisor to Thoughtful Executives | Outcomes-Based Leadership Architect | Activist | Former Private Equity CEO & F500 CMO | Board Director | Writer | Speaker | ThemyLLC.com
Goal setting in most businesses is wildly flawed and frequently meaningless. Many companies are chasing lag metrics like revenue or profitability without knowing what variables truly drive those measures. Put simply, we’re trying to affect something that’s already happened which is akin to chasing our tails.
So, how do you lead people to pursue your company’s most critical priorities in a smart, meaningful way?
Meet the five disciplines of execution.
Full disclosure: this idea is not mine. It stemmed from a book written in 2012 by Chris McChesney, Sean Covey and Jim Huling called The Four Disciplines of Execution. After working for 18 years as a CMO and CEO, my experience has taught me there is a fifth discipline, and it’s critical.
I was introduced to the The Four Disciplines of Execution when I headed up marketing at HGTV. The then-head of HR was sending his team for a day-long FranklinCovey seminar, and he invited me because I was the analytical one on the network’s executive team. Our network had been floundering for several years in ratings and desperately needed a new strategic plan and a win.
I’m not exaggerating when I say the training was life-changing for me. I immediately went back to my team and implemented the 5D system. At first, there was a lot of resistance from all corners of the business. Television is an inherently creative business, and a lot of creatives cringe at attempts to quantify what they do and how they do it.
But when the numbers started moving in the right direction, people got on board. In just three fiscal years, we increased revenue by 40% or almost $320 million for our division. I’ve since implemented the 5D playbook at two more turnarounds with great success.
The playbook includes these five elements:
1. Wildly important goals
2. Lead measures
3. Keep score
4. Accountability
5. Tie it to pay
Wildly Important Goals
A wildly important goal (WIG) is one that requires special attention to be achieved. You can have more than one wildly important goal, but beware: too many is a waste of time. I recommend no more than two WIGs in any given year. Humans have limited attention spans. When setting your WIGs, be stingy. Focus on the goal that will truly drive your business forward.
For most businesses, that all-important WIG will be a revenue or profitability goal. But merely setting a target number isn’t enough. There’s a format to it that provides the beginnings of a roadmap of sorts. You want to express your WIG in this format, highlighting three critical components:
From x to y in z period of time.
In the case of a hypothetical e-commerce business that’s pursuing a profitability goal, the WIG might look like this in real terms:
Awesomeness.com intends to go from $20 million to $25 million in revenue in 2022.
In this case, our fictitious e-commerce business’s WIG tells us three things: 1) where its EBITDA is today; 2) where it intends to go and 3) how long it will take to get there.
This is important because it’s measurable and specific. There’s no guesswork or nuance in the business’s North Star. Leaders can align and rally every person in the business around this one wildly important goal because it’s simply expressed and tangible.
Full disclosure: depending on what you’re WIG is, you may have to educate employees on what the all-important measure means. We executives live and die by EBITDA, but I’ve found most employees don’t know what that is. Take the time to educate them. If your WIG is a revenue one, you can help employees understand how your company makes its money. Tell them about the critical revenue streams and trends over the last few years. Your job is to give them context so you can get them fired up. Don’t assume they know it all.
Lead Measures
Your WIG is a lag measure. It’s called that because it happens in the past or lags. By the time you attempt to affect revenue, it’s already happened. You can only impact your WIG through lead measures. A lead measure is a variable that directly impacts a lag measure like revenue or profitability. It’s something you can actually control. I like to think of it as a lever you can pull to impact change. Lead measures are what makes the ball bounce.
Like a WIG, you want to be selective about picking lead measures. Two is the maximum you should establish. Remember, your role as a leader is to focus your people on the things that matter most. When we establish too many lead measures, our impact is minimized.
I will warn you that selecting your lead measures isn’t easy and requires some homework. The key question to ask is what makes our WIG happen? Answering that requires studying your business metrics and engaging in dialogue with key stakeholders. Some of the conversations around leads will get heated, and there may be some fits and starts. That’s part of the process, and it’s valuable because it shows intellectual rigor.
In our fictitious e-commerce business, Awesomeness.com, the lead measures might be sell-thru and average order value (AOV). Sell-thru is how many people buy your product. AOV is the average dollar value of orders. When both of these variables increase together, revenue increases. You’ll need to figure out the dollar amount tied to incremental gains in each lead. In other words, for every percentage point in sell-thru growth, your business will make a certain number of dollars in revenue. If you’re not a huge math person, don’t fret. You’re CFO can do this in her/his sleep.
Much like with your WIGs, you need to express your lead measure goals in the “from x to y in z time period format.” In our Awesomeness.com example, the leads could look like this:
Increase sell-thru from 40% to 45% in 2022.
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Increase AOV from $60 to $70 in 2022.
Fair warning, less is more. I can tell you that impacting both sell-thru and AOV at the same time is difficult. It can be done. We did it at Iconic Group, the e-commerce photography company I ran. But it requires an extraordinary amount of organizational alignment and cohesion and should only be undertaken if your company is a well-oiled machine. In my early years as CEO at Iconic, we were really good but not great. So, in those days, we tackled AOV alone because it was our best chance at moving the numbers in the right direction. Once we became a more advanced, cohesive organization, we took on both metrics with much success.
As leaders, it's our job to assess where the organization is at in its evolution and craft targets accordingly. Don't be afraid to take small steps to greatness. Remember that 80% of your results will come from 20% of your activities. Choose wisely and give your company the best shot at success.
Keep Score
The next step in meaningful goal setting is keeping score. You can only manage what you measure. It’s pointless to set goals if you don’t track your progress against them. Ideally, everyone at your company should be looking at the scoreboard daily.
Once you’ve set your WIG/s and lead measures, you need to create a comprehensive communications plan around it. This plan will educate employees on the targets you’ve set. Structure your communications plan around the classic seven questions that journalists use: who, what, when, where, why, how and by whom. I also like to choose a theme for the year related to the targets, something that people can rally around and remember.
In order to keep score you’ll need a high-visibility dashboard that tracks current progress on your WIGS and leads in as close to real-time as possible. Every person in the company should have access to this and be vested in looking at it daily. I recommend putting the dashboard on Slack or the company Intranet.
Once WIGs and leads are set, I like to kick off a year with town hall style meetings to discuss them with all employees. I give context on why these metrics were selected and develop a simple graphic for all employees to keep handy (example below). This is a visual that people can use as an anchor for their activities throughout the year. I recommend making it into posters and plastering it throughout the office. If you're a remote work company, send the posters to people's home offices with a fun branded tchotchke and figure out prominent places to post it digitally. This is the most important marketing campaign you'll undertake all year.
Accountability
The next thing you want to do is establish a cadence of accountability around your lead measures. Every employee in the company should have 1-3 individual performance goals that relate directly to your lead measures. Again, less is more. If you can come up with only one impactful goal, that's enough. The idea is quality, not quantity. In the Awesomeness.com example, individual goals should be structured to impact AOV.
This step in the process requires some brainstorming and dialogue. Your job as a leader isn’t to foist goals onto your people. Your job is to engage in a dialogue with them on what their goals might be. I find people will come up with the most fitting goals on their own. Your role is to set the framework and refine.
On the surface, we all tend to assume that only senior execs have control over key metrics. That’s not true. But you may find that some roles tend have more impact on one lead metric than another. For example, when I was at HGTV, our lead measures were reach and frequency. Reach is the sheer number of viewers you need to reach. Frequency is how many times you have to show viewers an advertising message before they tune in.
When I first unveiled these two lead measures to my marketing team, the creative folks who made tune-in ads balked. They didn’t think they could have a direct impact on either metric. As it turned out, our frequency goals required us to run a ton of ads. That meant we needed to have a certain number of different pieces of creative. Otherwise, we’d run the same ads over and over and bore viewers to death. With some simple math, we figured out how many different pieces of creative we needed for each show to impact frequency directly. That became the personal goal for each creator.
Each person’s individual goals don’t have to cover all of the lead measures, but they have to cover off on at least one of them.
Once individual performance goals are established for each person, each team in the company should set up a 20-minute daily meeting. These meetings are round-robin style and have an efficient and practical agenda:
1. Each person says what they did the day before to advance their individual goal/s
2. They ask for help if they need it
3. They commit to what they will do today to advance their goal/s
4. The group civilly and diplomatically challenges any goals that might be improved or seem off the mark
Tie It to Pay
The fifth discipline is tying performance goals to pay. I believe this is absolutely critical. Most companies pay out an annual bonus, but many don’t have defined rules for how people can achieve the bonus. Instead, many bonuses seem arbitrary and prone to favoritism. This solves that by expressly stating what the personalized conditions are for earning an annual bonus.
I like to craft incentive compensation around an individual’s ability to impact targets. I do this by laying out what percentage of a person’s bonus will come from hitting the annual WIG/s and what percentage will come from affecting individual goals related to lead measures.
I recommend establishing percentage weighting for every person in the company. In other words, specify what percentage of a person’s bonus is tied to achievement of the WIG/s and what percentage is tied to achievement of individual lead-related goals. Each person needs to have some skin in the game on the company’s WIGs, but the degree of impact will vary.
Executives are influencers, and they’re closest to the WIG/s. 75%+ of their bonuses should be predicated on whether or not the company achieves its WIG/s. The remaining 25% of an exec’s bonus comes from achieving individual, lead-related goals.
In contrast, a marketing manager might have 40% of his/her bonus attached to the WIG/s and 60% tied to achieving the individual lead-related goals. This person’s ability to impact the WIG/s is less direct, and his/her pay structure should reflect that.
This sort of incentive compensation structure also gives consideration to high performers who out-perform the company in a given year. Meaning, if the company misses its WIG/s in a given fiscal year, someone who achieves his/her individual lead-related goals can still get paid for their individual performance. They miss on the WIG-related part of the bonus, but they get paid for their contribution. This is set-up is absolutely critical to morale in challenging years.
In my first CEO role, I ran an established e-commerce company. We missed our targets that year, and it was my fault. I took on too many things and didn’t time some of them right. As CEO, 100% of my bonus was related to hitting the all-important WIG or EBITDA. Rightfully, I didn’t get a bonus for that year. But many of the employees got at least a partial bonus because they achieved their individual goals. It was a just way of keeping people engaged because it was centered on a sense of fairness and legitimate contribution.
After all, fairness is good business.
I leverage my legal background to protect and propel businesses | Experienced and Strategic Risk Management Advisor | Top Entrepreneurship Thought Leader
2 年Excellent article Denise! I have printed it out (I am old school! Lol) for future reference.
Coach & Advisor to Thoughtful Executives | Outcomes-Based Leadership Architect | Activist | Former Private Equity CEO & F500 CMO | Board Director | Writer | Speaker | ThemyLLC.com
2 年?? Are you pursuing leads or lags in your company? Need help figuring out lead measures for your WIG/s? Pop a note in the comments to crowdsource some help! ??