Startup Annual Planning 3: Performance Reviews and Individual Goals
Hi, I’m Kwin, co-founder of Daily.co and two previous startups. This post is part of my series about startups and tech. I’m always happy to be helpful to startup founders, and to people trying to break into tech, if I can be. Feel free to schedule a Daily.co video call with me, here.
It’s January, so if you’re a startup founder you probably are working with your team on finalizing your plan for this year.
This week I’m posting on annual planning at early-stage startups. Part 1 was about setting a top-level company goal. Part 2 was about making a budget for the year. This is part 3: Performance Reviews and Individual Goals
Most startup founders err on the side of not doing much formal “management” of people. If your whole company is still a two-pizza team, you don’t need a lot of process. And in the struggle to get to product-market fit, lots of other things take a back seat to product iteration, obsessive attention to growth, and fighting fires.
But good management is important. Good management makes a material difference to the success or failure of a startup. And as an employer, you owe your employees the most supportive working environment possible.
Writing down company goals
Managing individuals starts with being clear about company goals. Fundamentally, management is about making sure that everyone in your company is pulling in the same direction. That means writing down:
1. the company’s top-level goal
2. how the company is positioned right now
3. priorities and key metrics for the upcoming year
I written a new company goals document each year for our seed-stage startup. Each quarter we have a planning meeting. We all sit around a whiteboard together and update our company goals as a team. (We’re not rigid about doing this exactly on quarterly boundaries. We have our planning meetings when it makes sense for the team, and fits into our development and travel schedules.)
The company goals document starts with a single, top-level company goal. The first post in this series was about defining your top-level goal. Feel free to go read the full post if you haven’t already. The basic idea, though, is that most early-stage startups are aiming to get to cash-flow break even, to achieve product-market fit, or to position themselves for a Series A. These aren’t mutually exclusive goals, but they are different enough that it’s worth being clear about what your main focus is.
Once you’ve defined your top-level company goal, you’ll want to describe how the company is positioned right now. A company has products, customers, and competitors, plus cash in the bank, revenue, and runway. Also, your team has strengths, unique attributes, and core beliefs about how your market is evolving.
Finally, list the one or two metrics that you want everyone at the company to be thinking about every week, and make a very short list of priorities for the year. Metrics and priorities should be tightly coupled. For example, if your key metric is revenue, then your priorities list should probably include only items that directly support revenue growth!
The company goals document doesn’t need to be long. I’m very long-winded (as you can tell), but I don’t usually write more than 800 words or so. And I always throw in some extra stuff about how we can evolve our communications processes, or trends I just saw at CES, or something else on my mind!
Translating company goals into individual work
The content of the company goals document needs to be turned into work that individual team members do every week.
At an early-stage company, almost all communications and management processes should be organized around short cycles of iteration. The company goals document is a living thing that you update regularly. It guides what you talk about at daily standups, what you decide to prioritize in product planning meetings, and how you define tasks and triage work in sprint meetings.
But it’s also important to do an annual check-in meeting with each person in your company. This kind of annual management meeting is often referred to as a “performance review.” That term only captures part of what the conversation should cover, though.
Here is my three-topic agenda for a normal annual check-in meeting:
- Looking back over the last year, please tell me what you thought went great, and what didn’t go so great (or maybe even went terribly).
- What do you want to accomplish this year?
- Here’s my feedback about things you can improve and skills you can further develop.
I have these meetings after sharing the company goals document, so the conversation usually moves, in an organic way, towards how the company goals and the individual person’s work will align over the next year.
A “normal” annual check-in is one for an employee who is doing well in her role. With someone who isn’t doing well at the company, the meeting is harder to plan for. As Tolstoy might have written, every unhappy employee is unhappy in his own way. The “feedback about things you can improve” part of the meeting is the most important thing to focus on for an employee who is struggling.
OKRs and quantitative metrics for individuals
I have never found it useful to set quantitative goals, or even to have specific quarterly goals, for most individuals at early stage companies. If you haven’t found product-market fit, yet, and don’t know what marketing and sales channels will really work for you, it’s very hard to set meaningful quantitative goals.
As a startup grows, setting individual quarterly goals does become important. Some variant on an Objectives and Key Results process is used by most mid-stage companies in Silicon Valley.
If you haven’t worked at a company that does quarterly OKRs, it’s worth learning a little about them. You can incorporate some of the principles into your management processes for small teams. Rick Klau’s presentation on OKRs is the classic resource. Kevan Lee wrote a great piece a couple of years ago about OKRs and how he uses Trello to track and manage them!
Generally, though, my advice is to keep quarterly planning very lightweight until your headcount passes 20.
h/t to Angel Alonso Say for the pointer to Kevan Lee’s OKR post