OKRs, KPIs, SMART, north stars, stoplights – there are so many methodologies and frameworks for tracking product goals how are we supposed to figure out what to do? Well, what if we just didn’t use any of them?
But! But! But! OKRs are what IBM and Google use, and, and, and all of these frameworks have a fantastically overused, niche example of them working perfectly. Let’s get a little bit spicy for a second, these frameworks are mostly a huge waste of time and effort.
Every team we’ve seen try to implement OKRs or KPIs or some other system blessed by the product gods has ended up more frustrated, confused, and miserable than when they started. Not to mention they’re so bogged down by the goal setting process that they haven’t even manage to achieve any goals.
So, what are we supposed to do instead then?! Well, let’s take a look at this nice and simple three step approach for setting goals.
Step 1: we gotta figure out how to make money on this thing
Let’s start by saying the quiet part out loud. In our current capitalist system, businesses exist to solve a problem for people in exchange for money. We typically call these solutions products or services depending on how much human activity is involved, but for our purposes we’re going to treat them the same and call them a product.
So, if you’re building a product to sell, then you are a business. If you don’t intend to sell your product, you have a hobby. Hobbies rock, but that’s a topic for another day.
One goal to rule them all
Where does this leave us? Well, as a business, we want to sell our products to make money to cover our costs and earn some profit so we can get paid for all of our time and effort, which leads us to the first thing we need to figure out to set our goals: how much money do we need to make this year1 to cover our costs?
That’s it – that’s the number one thing we should really care about. Now, don’t get me wrong, there are other worthy goals for us to pursue as well. Taking care of our team, helping the planet, giving to the community – things we should definitely strive to do. But… if we aren’t making money, then we can’t do those other important things.
Now, ideally we could have an open conversation with our whole team and say, “here’s how much money we need to make, let’s go do it.” Some companies do this quite well, notably Buffer with their entirely open company.
However, money has a way of making things weird. And if you find yourself in that sort of environment, it can be a little tricky to say, “here’s how much money we need to make, let’s go do it.” So, instead of stating things in monetary terms, you’re going to want to take that number and translate it into units or customers. Let’s walk through an example together.
Calculating your goal
Let’s say we sell energy drinks for $10/bottle (trust us, it’s that good) and we need to hit $200,000 in annual revenue to cover our costs. But, the team get upset when things are framed in dollars, so let’s convert our revenue to bottles and then into customers.
So, instead of hitting $200,000 in annual revenue, we need to sell 20,000 bottles ($200,000 / $10). Now, we might need to sell 20,000 bottles to 20,000 customers, but in reality the average customer buys 50 bottles a year (they just can’t get enough of the stuff). So, we just need to acquire 400 customers (20,000 bottles / 50) this year. Bada bing, bada boom we have our target.
Whether it’s in dollars, units, or customers, we now have our primary goal: we need to hit this number to stay in the game as a business.
Of course, most businesses want to make a profit, so your primary goal should be higher than your breakeven number. But hey, some years, even breaking even is winning.
Step 2: let’s get chunky
Much like we can’t get abs after one trip to the gym, we’re not going to be able to achieve our annual goal in a day. We’ll need to chunk our targets and spread them out over the course of the year. We typically use quarters and months for this – weeks can work, but they’re usually a little too zoomed in.
Continuing our example, we’d need to bring in 100 customers a quarter (400 customers / 4 quarters) and 33.3 customers2 a month (400 customers / 12 months) to hit their goal.
Now, we can get fancy here and distribute these targets however we’d like. Generally, we need to ramp up to hitting a target, so we might have some lower targets for earlier dates and larger numbers for later dates.
Distributing targets generally turns out a lot like Whose Line Is It Anyway, “the show where everything is made up, and the points don’t matter.” What’s more important than getting the numbers exactly right here is having a rigorous discussion around what’s possible and what’s not.
That also means that this is a good time to get the rest of the team involved. The best way to promote accountability and ownership over goals is to let people have a say in setting them. So, having the team help distribute the targets will not only lead to a better estimate, it will also help them buy-in to the process.
Step 3: how are we going to get there?
With the primary goal and cadence in place, you’re ready to work with your team to figure out how you’re going to make that happen. There’s no tricks here, you’ll just need to get everyone together, order a few pizzas, and figure out what you’re going to do together. The way we typically do this is to:
- Create a list of all the current initiatives that are in progress.
- Brainstorm all of the possible initiatives we could undertake to achieve our primary goal.
- Have the whole team rank all of the initiatives based on how likely they are to result in progress towards the primary goal.
- Divvy up the work and get going.
It’s goal time
At this point, your team might realize that there are some other goals that matter. Maybe we need to maintain a certain level of customer support to retain existing users. Maybe we need to ship this feature to address this user feedback. Maybe we need to double our social audiences to build our top of funnel to hit our conversion numbers.
More goals are total okay as long as you can point them back to your primary goal and explain how achieve the secondary goal results in progress towards the primary one.
Also, there are diminishing returns to too many goals. Generally, speaking three goals seems to be the magic number for most teams. But, your mileage may vary.
Fostering ownership and accountability
Sometimes, your team will come up with some great ideas that everyone can align around and other times you might provide more structure around the direction. But, regardless of where the ideas come from, just having the team involved in the decision-making process helps them feel more ownership over the direction and feel more accountable for the results.
If you want to get really fancy, it helps to align your incentives with the goals you want to achieve. For example, if the team sells 33.3 bottles by the end of quarter 1, then they all get a bonus. It's amazing to see how far a team can go when they can share in the upside.
One word of caution, don't ask for everyone's ideas on the direction and then totally ignore them. This is one of the fastest ways we've seen to demoralize a team. Of course, you won't be able to do everything the team comes up with, but you should recognize their efforts, explain why you're not doing what they recommend, and why you're prioritizing these other goals.
And there you have it
Just like that, we didn’t have to get all bent out of shape following some crazy process to come up with our goals. Instead, we figured out what mattered most to our business and aligned all of our work around achieving it.
The beauty of this approach is that alignment, clarity, accountability, and ownership are baked into every step of the process and not something we had to artificially add. Now go out there and achieve your goals!
As a business, we tend to think about our monetary goals on a yearly cadence. This is because we typically need to pay taxes on a yearly basis, but also because it’s hard to plan more than a year into the future. ↩︎
Notice how we don’t have a whole number for months? This is annoying, but easily fixed by rounding up. We always round up or else we’ll miss our target. ↩︎