Revenue Isn’t Everyone’s Goal

Why did we go into business in the first place? Why are we building this new product? What’s the purpose of this new marketing campaign? The simplest answer to these questions and similar ones is, “to make money.” Revenue is the king of all metrics. Right? If you’re not thinking about revenue, you should be. Right? Because of this everyone should have a revenue goal. This is a common argument in companies of all sizes. It also doubles as an executive shortcut to getting OKRs implemented and done quickly. We just give everyone the same revenue targets and that’s that. Goals defined. Let’s get to work. Easy right? Sure. But it doesn’t make any sense when you dig into it.?

What is your team's sphere of influence?

If you’re in charge of the entirety of a new product or service undoubtedly one of your success metrics will be revenue. You have control over the entire product experience, go to market plan, pricing strategy, marketing campaigns and customer acquisition and support systems. The problem in this case is that revenue is a lagging indicator. It happens, if at all, after your customers have been through the stages of awareness, acquisition, activation and retention at the very least. In these cases, where teams control the entire customer journey, setting revenue as a key result in your OKRs ignores all the customer behaviors that have to happen ahead of money coming in. We risk optimizing the system to extract as much revenue out of existing customers rather than ensuring the system’s long-term sustainability. Bug fixes, optimizations, user experience improvements are delayed, deprioritized or ignored in favor of extracting maximum value now. Eventually the current customers will leave stranding us with a broken product and no revenue.?

However if your team is not in charge of the entire customer journey, in nearly all cases, revenue should not be one of their key results. Take for example a team working on customer onboarding. The distance between onboarding a customer and hitting a revenue target is long. Not only do we have to acquire these customers but we have to get them started with the product. We need to ensure the onboarding process makes them familiar with what the product can do and how they can best take advantage of it. We need them to complete the onboarding process so they can start being productive immediately. These activities should be the key results for the onboarding team. They don’t control the user interface of the tool, its cost nor any customer acquisition processes. If this team gets customers through onboarding successfully the odds of the company making money go up but this team can’t influence the customer once they complete the onboarding process.?

In this case, revenue doesn’t make sense as a goal. It’s outside of the team’s sphere of influence. They’re in charge of the leading indicators of revenue, can influence those behaviors and should sign up for key results that reflect that. This is true of any team in your organization that only controls one part of the system. In most cases, revenue goals, though easy to set, make no sense for them.?

Understand what drives revenue, optimize that

Oftentimes, as leaders are setting goals, they may not actually be familiar enough with the customer journey to identify the behaviors that can function as leading indicators. In these situations the best you can do is work with these leaders to map and visualize various customer journeys through your product. Help them understand where customers come from, what we see and would like them to do in the system and how those behaviors drive revenue. Each step in this process should be an action, a short verb phrase, that indicates something we expect the customer to do. Each of these short verb phrases should answer the question, “Who does what by how much?” For example, “First time visitors create an account during first visit 50% of the time.” Once we’ve identified the various behaviors that drive revenue we select the ones where we believe there is most opportunity and those that make strategic sense. Teams can now be assigned to each of these key results to optimize the leading indicators. Revenue will follow.?

Setting revenue goals for everyone is demoralizing

Teams should understand how their work influences revenue. That doesn’t mean they should be held accountable for it. When a team that is 4 or 5 layers removed from revenue is assigned a revenue goal from an executive it saps their motivation. It illustrates that the leader doesn’t understand what the team does nor how the system works. Instead it focuses the team on short cycle sprints designed to bring in short-term wins. The hard work of building a customer journey that delivers revenue consistently is left on the cutting room floor. By contrast, teams that work on goals they can directly influence are far more motivated. Connecting the dots with them to understand how their work drives company success is important and necessary but their focus should remain on their specific sphere of influence.?