Have you ever been in a situation where everyone was pushing in the same direction and you were able to move mountains? It's OK if you haven't; most companies have a hard time setting clear and effective goals. I want to shed light on how you can create this kind of environment in your company.
But before we can discuss best practices (in my next post) we should first lay some foundation to explain what I mean when referring to metrics and goals.
There’s a lot of confusion, conflation, and lack of standardization for the terms that are used with goal-setting. As someone who recently moved from San Francisco to Berlin, I’ve gained more appreciation for how a language barrier can further complicate communication on this topic.
Goal-setting is a process for creating clarity and focus for teams, to enable the organization to deliver upon its strategy. But inconsistent and ambiguous goal-setting language undermines the purpose of the exercise.
In this post, I will outline how I define and use some of the key terms for goal-setting. It’s worth noting that when it comes to semantic discussions there are many differing opinions, and context is important. So this content should be taken as what I have found helpful in my role as a Product leader at early-stage technology companies.
To begin let’s look at something you might hear your CEO say:
As shown in this example, a Metric is anything you measure to help you make decisions or evaluate progress.
Metrics are sometimes used to assess the performance of a company as a whole, but they are also used to measure projects, processes, products, teams, or individuals. Metrics can measure any type of unit (such as with money, counts, or time) or they can be unitless (such as with percentages). Metrics can be directly measured: e.g. New customer sign-ups, sprint velocity, and Net Promoter Score. Or they can be calculated from other measurements: e.g. Month-over-month revenue growth, gross margin, and CAC payback period. So, if you’re measuring something then it’s a metric.
While we are talking about metrics let’s define KPIs: Key Performance Indicators. A KPI is a metric that you determine is significant to the performance of your business or project.
There is no rule for which or how many metrics to use for KPIs, and they will vary from company to company and team to team. But the concept is designed to be a focusing tool. To quote Andy Grove, co-founder and former President of Intel, “If we try to focus on everything, we focus on nothing”. So you want to make sure that the subset of metrics that you choose for KPIs are really the most critical to the activity that you are trying to evaluate.
Notice from the example above that the metrics don’t have numbers accompanying them. When using the term “metric”, we are just referring to what we are measuring and not the level that it is or that it should be.
Let’s look at something else you might hear from your CEO:
A Target level is the value that you are trying to achieve for your metric. A Target can specify an increase or decrease, or it can aim to stay within an acceptable range.