Introduction
I sat looking at last month’s revenue target miss of 30%. Not again. I began rallying the team to a new reforecast for next month which was also the last month of the quarter. We got it done in an hour. We looked each other in the eye, made blood oaths, signed the targets in ink, etc. This would be the month we achieved our goals.
The month started. The first week passed. We were slightly behind, but things were always slow the first week. The second week passed, a tough week, but we had a strong-looking pipeline. The third week, well, that was a wash. The last week… everything closes on the last day of the month, right? The month ended. We missed our quarter revenue goals by 40%. What had happened to our vows?
Well, we hadn’t really wanted to see the writing on the wall. We had been relying on outbound, upsell efforts, and higher close rates to hit our targets. However, when we went back through the data we saw: our team hadn’t been making the number of calls necessary, our email campaigns had been ineffective, our sales velocity was abysmal, and our regular CS outreach had stalled. The team had lost focus on the day-to-day grit that it takes to get there and management had convinced itself that our results would somehow reach targets.
In startups and scale-ups, there are a *lot* more unknowns than in larger companies and you *have* to have faith because nobody has done what your company is trying to do. But, that is not an excuse for Finance not ensuring that teams execute. You have the opportunity to improve the next quarter’s results. Simply speed up the “plan, action, iterate” cycle by ruthlessly monitoring the team’s execution on targets.
Driving Insights and Actions on New Targets
We have talked about the necessity of having a rolling forecast process, but planning is only 5% of the work. Execution is 95%. It’s easy for Finance to invest most of the time in planning, which is easier (and sometimes sexier) than driving action. But execution is where a strategic finance team's true impact lies. You need to make sure your company goals translate smoothly into actions and that each of these actions is delineated clearly to a team. Every week you should lead the executive team in tracking, iterating, and holding people accountable to results tracking to goals. To do so:
1. Establish accountability (the basics)
Knowing who is supposed to accomplish what is the backbone of achieving your goals. If nobody is responsible, it isn’t just “going to happen.” Of course, things come up in business and in life, so the key is to remain flexible and implement the correct processes. To do this:
Set clear goals. The targets set for each team need to be crystal clear and in their control. If one of the key metrics, like CaC payback, is owned by two teams (sales and marketing), break it down so that Marketing is responsible for expenses and SQL generation while Sales manages conversion rates to revenue and outbound generation.
Assign owners to targets. Make sure that each target is owned by an individual at the highest level. If a leader wants to delegate ownership to one of their team members, that’s fine, but ultimately, they are responsible.
Shift ownership when necessary. Encourage the executive team to consider shifting ownership in your re-forecasting process, if necessary. Maybe you switch the retention goal from Customer Success to Product based on the underlying factors driving that metric.
Establish the stick. Ultimately, the CEO is responsible for enforcing accountability, whether by adjusting responsibilities or removing team members. You need to provide the objective numbers and the clarity to help her make decisions.
Targets are essential to aligning the company with results, but all of the planning will go to waste if people don’t feel accountable to their targets. The last thing you want is to establish a culture of missing targets which undermines the entire value of the finance and planning process.
Tip: Have an accountability discussion with your CEO early. How will she enforce targets? What does she need from you to make these decisions?
2. Capture the ‘input metrics’ whenever making a plan
When you make any forecast, you need to make sure you capture the actions (input metrics) that lead to the results you want, specifically what people are physically doing to make your targets a reality. Examples include the number of outreach emails sent, calls made, ad money spent, product features released, onboarding sessions conducted, training hours logged, and customer tickets resolved. To do this:
Break down every key target into input metrics. Every key output target can be deconstructed into input metrics, similar to a DuPont analysis. Keep track of this breakdown in your reforecasts.
For example: Opportunities (output metric) = # of outreach emails sent (input metric) * % conversion to meeting * % conversion to opportunity
Clearly define who is responsible for which inputs. Specify who is responsible for each input metric and clarify what actions each team is committing to.
Ensure each task has a weekly target. Break tasks into weekly targets to monitor progress effectively. While daily targets are possible, they are generally more suitable for team leaders than management.
Break down target misses to failed actions. Avoid accepting generic explanations like, “We missed targets because our conversion rate was down.” This might be acceptable at the board level, but internally, the company needs to understand the root cause (e.g., insufficient training, poor qualification reviews, or an underperforming representative) to address and fix the problem.
For more details on the difference between input or output metrics, refer to Amazon’s focus or how these principles can even be applied to product,
Tip: Focus on a few key input metrics tied to key outputs and ensure they are included in your operating models. Strive for balance between input and output metrics, keeping in mind that these metrics can be more easily gamed. Start small, test thoroughly, and gradually expand across teams.
3. Measure the metrics weekly. Loudly.
You need to clearly track your weekly progress against targets (both input and output) in an easy-to-read way. This means not only getting the numbers quickly, but showing them in an accessible way that can be drilled down if people are interested. Yes, it is a lot of numbers. Here is how to do it:
Systematize the work. You want your systems rolling up into a master overview daily. The only way this is possible without an enormous amount of manual reconciliations is to make sure your systems feed into a single source that shows your targets and your actuals.
Use a tool that allows exploration. You can’t display every number to your many employees; they will get overwhelmed. You need a tool that shows the key numbers and then allows you to ‘drill down’ into the input metrics as appropriate.
Send the information in different formats. People process information differently. Make sure you provide charts, written summaries, and raw numbers in a standard way to increase comprehension.
Celebrate the wins. There is more to celebration than just a sales gong. All your teams contribute to these numbers. Each week, highlight a particularly strong action and recognize the team members responsible.
Refer to the numbers in team meetings. Encourage each team lead to spend five minutes reviewing these metrics at the start of their weekly meetings. This encourages review and feedback in an informal setting.
Tracking metrics publicly not only increases people’s knowledge of the company but also increases accountability of those responsible. Doing this well will make your job vastly easier.
Tip: Send out a standard email each Monday morning with visual graphs and written summaries, while linking to a dashboard that shows all of the raw numbers.
4. Personally track and escalate key indicators, quickly
Everything in your company is interconnected. Of course, you can’t have *everyone checking everything.* This would result in a tremendous lack of focus. However, as a finance team you should understand how all numbers interact so that you can quickly diagnose and bring up any canaries in the coal mine. Here are some tips:
Tie KPIs to your Customer Journey. Assign each stage a measurable metric to evaluate how well processes are flowing between teams. Monitor these. For example: Time sold to onboarded, SQL conversion rates, Time to Value, etc.
Spend an hour or two each week reviewing everything. Just sit. Look at the key metrics. Understand what actions drive them.
Model scenarios to understand sensitivity. You should be able to quickly play with input metrics in your models to show you the impact of exceeding/missing targets. This grounds the entire company in what matters.
Keep customer feedback front and center. Spend time understanding customer insights by reviewing CS calls or directly reaching out to your customer counterparts.
Nobody but you is going to analyze metrics across the entire company in depth. It is your responsibility to guide the company and escalate to the CEO when performance consistently falls short.
Tip: Keep your ear to the ground of your business. Listen to customer and employee feedback on a regular basis. Just relying on numbers can be misleading…
5. Align incentives to targets.
Ensure that people’s pay aligns with the company’s goals. Payment and incentives aren’t everything, but they can reinforce a shared direction. For example:
Include a monthly ‘activity’ kicker in sales commissions. Most of the sales commission should be based on final results, but also offering bonuses for outbound calls or emails will encourage the day-to-day activities that drive long-term success.
Provide a portion of CS pay as a # of positive customer calls conducted. You want to make sure you are staying customer focused. You want to reward positive touchpoints, not just upsells or retention.
Connect 50% management bonuses to quarterly results. Urgency is necessary when scaling. People can get complacent when they see hockey-chart graphs and believe that results will “just happen in Q4.” Nip this in the bud and focus on a large portion of management bonus on what teams are achieving each quarter to ensure execution.
There are many ways to do this across nearly every team, and you will need to find the compensation that balances long-term success with short-term activity.
Tip: Equity is a great alignment tool, but it’s long-term, complicated, and increasingly discounted by employees. Use bonuses to more directly drive results.
6. Iterate quickly
Of course, flagging an issue is only the first step in solving the problem. You need to encourage flexibility and iterative solutions until the company reaches the desired level of performance. This means encouraging an openness to frequent changes of tactics and monitoring the ensuing results. The key to this is to:
Act swiftly. Once you see something, act quickly as a management team. Call the person responsible, bring people over, and implement quick solutions. Don’t wait for the dreaded management delay: “Yes, Let's do it. I will talk to the team.” Two days later: “Actually, they don’t think it will work because X.” One day later: “Let’s move forward with Y starting next week!” Seven days later, you’ve lost 25% of the month.
Data doesn’t need to be perfect to make decisions. Make sure you aren’t stuck on perfection, for example debating whether a team member made 41 or 43 calls. You will never have all of the data. To be quick, you need to act on the best data you have rather than stalling to ‘get more data.’
Don’t let systems slow you down. Oftentimes your systems aren’t perfect. If all else fails, have people fill out key activities in a spreadsheet, complete a tick mark after every event on a chalkboard, etc. It’s not hard to add up tallies at the end of each day, but its obviously not sustainable.
Get relevant teams together. If your problem is between teams (say CS and Product are sniping), force them into some quick huddles every day. This allows people to act quickly and frequent touchpoints decrease the pressure compared to a single “let’s solve everything” session.
Document learnings and iterate. Incorporate them into your reforecast by making notes of why things worked or didn’t. This forces the team to agree on the “why” and will be useful in six months when you are looking for new solutions.
Break your plan into actionable steps, monitor progress relentlessly, and iterate based on data to build a culture of disciplined execution and success.
Tip: Make sure you tell the story of how these changes are building upon past decisions, else “rapid iterations” can feel chaotic to certain team members
In conclusion
Driving action to achieve your targets should make up 95% of your role. Planning is meaningless if your team doesn’t reach its targets. As someone with an organization-wide mandate, you are uniquely positioned to see how different facets of activity impact one another. Remember to hold yourself to the same standard of accountability that you expect from your team.
