Stretch Goals for Startups

Stretch Goals for Startups

What there is in for me:

  • Should a startup use stretch goals?
  • What a startup needs to use a stretch goal?
  • The framework of The Stretch Goal Paradox works for startups?

I recently read an interesting article about setting stretch goals, “The Stretch Goal Paradox” by Sim B. Sitkin, C. Chet Miller, and Kelly E. See.

Setting stretch goals became quite famous recently, especially in the tech world because of the OKR methodology that Google, Intel, Twitter, and other use. In the OKR (if you don’t know what it is, read these slides), the goal isn’t to achieve 100%, but rather to set a challenging goal that even you working hard you would probably achieve 70-80%.

They are also very common when a new CEO is hired to turn around a company and needs to change moral of the team and also to convince the investors.

The article argues that not all companies should use stretched goals because it can backfire. Also, the authors propose a framework to evaluate if a company should use it or not, as you can see below.

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They use two variables to evaluate: Past Success of the Team, and Uncommitted Resources. The framework seems to make sense, at least for big corporations. However, my interest is in startups! Would this framework work for them?

Let’s check each variable for a startup. First the past success of the team, by definition, startups are still in early stage, not having any real past success, at least in the actual company anyway.
Regarding uncommitted resources, we all now that startups don’t have spare resources, they always lack resources. They are most of the time working beyond their capacity.

Using those assumptions for variables in the framework, we got that none startup should use Strech Goals. But… Should they?

Growth is the fuel for startups, a startup without growth is a walking dead startup. So, startups should grow, not only grow but grow really fast. That means that they should put hard goals to achieve and work as hard and intelligent as they can to achieve it. Would any of the great startups we have been successful if they didn’t have bold and audacious goals?

That leads me to conclude that all startups should use stretch goals, meaning that the framework won’t work for startups.

Although I think all startups should use it, they have different problems than big corporations. Therefore they need to evaluate different variables to check if they should use or not.

  • The startup should have a metric-oriented and accountable culture. If the team isn’t focused on metrics and it isn’t held accountable for their results, setting a higher goal will just make the CEO get even more stressed;
  • Startups should understand well their business metrics before commit to a stretched goal. It’s bad to walk in the wrong direction, but it’s even worse to run with all your strength to the wrong direction;
  • The startup should have a Big, Hairy, Audacious Goal (BHAG). The team will put all their effort to achieve a challenging goal if it’s linked to a remarkable purpose, not just because the CEO set the goal.

There might have other pre-requisites for a startup to use stretch goal in a proper way, even though those seem to me as the main ones.

What do you think? Should a startup use a stretch goal or not? Why? When to use and when not to use?

Key Takeaways:

  • Stretch goals are even more important for startups
  • Use stretch goals when you have a metric-oriented and accountable culture
  • Use stretch goals when you know well your real business metrics
  • Use stretch goals when you have a Big, Hairy, Audacious Goal (BHAG)

Here follows some BHAG to inspire you with yours:
“A computer on every desk and in every home.”Microsoft
“Organize the world’s information.”Google
“Connect the world.”Facebook
“Transportation as reliable as running water, everywhere for everyone.”Uber
“Tesla’s mission is to accelerate the world’s transition to sustainable energy.”Tesla
“Make easy to do business anywhere.”Alibaba
“Remember everything.”Evernote

The Importance of Communication in a Startup – Part II

The Importance of Communication in a Startup – Part II

What there is in for me:

  • Why communication is a key attribute for entrepreneurs
  • Good news and bad news, which one to share with my team
  • How to build trust and motivate your team using communication

Continuing my last Communicating with Investors, now let’s talk about:

Communicating with the Team
If you’re really aiming to create a great company, you and your team are onboarding in a very tough journey. The problems with communications usually start in setting the expectation. As working in a startup is cool nowadays, everyone wants to work in one, but few are willing to face the struggle and work the long hours necessary to create a great company.

Startups need a talented and dedicated team, so it’s important to set the expectation to the new employees upfront and make sure they are willing to commit together with the rest of the team in this endeavor.

The other problem that many entrepreneurs face related to communication with their team is the difficult to inspire the team toward the dream the entrepreneurs have. Sometimes the entrepreneurs can’t articulate in a proper manner his mission, and other times is just a lack of communicating it well to the team.

If a CEO wants their employees to give all their sweat and blood for the startup, he needs a clear Big, Hairy, Audacious Goal (BHAG) and communicate clear and constantly to all members of his team. Elon Musk uses SpaceX BHAG to motivate his team to achieve unthinkable results, here follows its statement:

“SpaceX was founded in 2002 to revolutionize space technology, with the ultimate goal of enabling people to live on other planets.”

That is a quite powerful goal to motivate SpaceX team, even during the many arduous times they face!

Another common communication problem entrepreneurs have is not delivering bad news.

Is part of the human nature to not like it to deliver bad news; we don’t want to disappoint people or make them feel bad.

Therefore, founders tend to only communicate good news to their team. When a big account is won, they celebrate; when an investment round is closed, they celebrate even more! However, when they lose the most valuable client or when the startup has a month of cash…silence! During these situations is exactly when you can identify the great entrepreneurs. They inform, take responsibility, and work together with their team in a plan to turn the situation around!

If you worked hard to hire an amazing team, don’t expect them to be stupid and don’t discover what is happening in the company. Also, remember the equation from the post Part I:

CHANGE + UNCERTAINTY = CHAOS

Although there will always be change, good and bad, in a startup, entrepreneurs can reduce the uncertainty by communicating the situation, preventing gossips and speculations that can lead the team into chaos.

Google has a meeting called TGIF ( “Thank God is Friday”) where any employee can ask any question to the founders, that shows a culture of communication and transparency.
When times are hard, it isn’t the lack of information that will save a company. Rather, a great leadership and a motivated team are needed to overcome this situation. For your team to work hard for you, they need to trust you! And they won’t trust you if you’re hiding the situation from them.
Concluding, communication problems with team can have a huge impact on a startup performance, for better or worst! Start a culture of communication while your team it isn’t that big, changing it in the future is going to be a bigger challenge!

Key Takeaways:

  • Have a great Big, Hairy, Audacious Goal (BHAG) and communicate it
  • Sharing bad news is as important as sharing good news
  • Don’t hide bad news; your team isn’t dumb
  • If you hired the right team, trust them
  • Change + Uncertainty = CHAOS