Its the 2nd half of the year already. Time to look back and see how things are going. Often, especially for young startups, it can be hard to set accurate targets. And if you have investors or are raising capital, you can be under pressure to set optimistic goals. So, often startup founders and management teams face a common challenge: what to do when it is clear that the company will not hit its targets.
There are two schools of thought here. Some say targets are targets, and if we agreed to them, we’re accountable. No matter how far behind we are. The other says don’t fool yourself. If there is no chance of hitting your targets, it makes sense to adjust them.
I’m no softie, but I am definitely in the second camp. Startups are small and populated by highly intelligent and dedicated people. You can’t fool them. And asking them to work towards unrealistic targets is a sure fire way to both demotivate them and kill their trust in management.
If you are going to change your targets, here are my suggestions for getting the most out of it:
Diagnose: Hold a post mortem, ideally involving much or all of your team. Drill down into what went wrong. Were the targets crazy? If so, how / why were they set in the 1st place? If not, then what happened? What caused the shortfall in actual performance and what can be done about it?
Reset: Armed with new knowledge and insight into your performance, set new targets. Make sure your investors / board are behind them.
Communicate: If the whole team was not part of the diagnosis, make sure they are all assembled to get a summary recap of that diagnosis and to hear why the targets are changing and what the new targets are.
Partial mulligans: For staff with incentive comp tied to targets, reseting targets should not be the equivalent of a Mulligan. You need to retain some incentive to hit the new targets, but unless your diagnosis tells you that the targets were flawed to begin with, there should be consequences (in terms of reduced incentive) as a result of lowering your targets.