How to set good goals 🎯

Amsterdam Product Club #13

Oct 25, 2022

As a product manager, one of our most important tasks is to make sure everyone moves in the same direction - channeling all your team’s resources to solving the most impactful problems. That’s what goals are for. Goals are a tool to help align and motivate your team to successfully achieve the desired outcome. In this post, we discuss how to set and use them. Let’s dive in!

Why do goals work?

Goals help your team achieve the desired outcome in two ways:

Simplification
Clear goals reduce complex trade-offs to a single problem you need to solve. As Paul Graham puts it:

We usually advise startups to pick a growth rate they think they can hit […] If they decide to grow at 7% a week and they hit that number, they're successful for that week. […] Programmers will recognize what we're doing here. We're turning starting a startup into an optimization problem. […] Focusing on hitting a growth rate reduces the otherwise bewilderingly multifarious problem of starting a startup to a single problem. […] Should you spend time courting some big customers? Should you add x feature? Whatever gets you your target growth rate.

Motivation
In addition to that, goals keep you motivated. Compare it with working out: If you told everyone that your goal is to run a marathon in 3 hours, it’s much easier to stick to your training regime compared to someone who just wants to run 4 times a week. The founders described by Graham start to take pride in consistently hitting their weekly growth goals and telling the Y Combinator staff about it. This mechanism will play out for your team too.

How to set great goals

Focus on the right things

When turning creating a great product into a single optimization problem, it becomes paramount to optimize for the right thing. So how do you pick that thing?

Make sure your goals fit into your strategic framework
A set of goals is not a strategy, they should be embedded in your strategic framework. Your framework should look something like this: Vision → Strategy → Goals → Roadmap. Your goals are derived from your vision and strategy, and should in turn inform your roadmap. If you want to learn more about how to set your vision and strategy, read this article.

Pick goals that work
Second, great goals should have a few attributes:
1. Important for your business
  The goal should be important for your business. If it’s not, it’s unlikely you’ll get your team and stakeholders excited about it and either you or the goal will be removed soon.
2. (Exclusively) within your control
  The goal should be within the control of your team. This also means it shouldn’t be in the direct control of another team, as this might lead to a turf war.
  Example: 10M Daily Active Users is your company goal for Q4. The acquisition team will focus on acquiring 100.000 new users per week, while the product team focuses on retaining 40% of them. Combined, that will get you to the company goal.
3. Simple
  The goal should be easy to understand for your team and other stakeholders. If not, the goal isn’t compelling and will not inspire action.
4. Quick feedback loop
  It should be easy to measure changes, without huge sample sizes and long waiting times. Faster feedback loops = quicker learning = better results.
5. Stable
  The goal should not change too often. This allows your team and stakeholders to gain deep knowledge of all the factors influencing the goal. Changing goals every quarter leads to shallow understanding.

Set the right target

Most PMs set their goals by extrapolating from the current levels their KPIs are cruising at. But if you do that you miss so much valuable information. If you believe you can only move a conversion up by 5% you might only look for incremental improvements. If you know it could actually be 50% higher, you will arrive at more creative ideas that lead to bigger changes. Instead of starting from where you are now, you should try to find the “natural limit”. The natural limit is the point after which more improvements yield little to no further impact.

How to find that “natural limit”?

Benchmark against other products. There’s a surprising amount of info you can find on this via Google or Twitter search queries. Alternatively, you can ask PMs you’re friendly with who work on similar projects.
Find the best cohorts in your product. Another strategy is to look at what the conversions for the best groups of people in your product look like.

Let’s give an example from my work at VEED: I set the goal to increase one of the main conversions from 30% to 35%. With millions of people using our product, this would truly move the needle. But when surveying the data closer, we found that the conversion for English speakers is 45%. Because we could find few fundamental reasons why non-English speakers should have lower conversions, we knew we had to be more ambitious. Now, our goal is to move the conversions for Spanish (second biggest language) speakers up to 45%. Better goals provide more understanding of the problem and let you make a more focused effort.

Tips for setting and monitoring goals

See the world from a customer’s perspective
Articulating your goals from a customer’s perspective helps avoid tunnel vision. Instead of improving add to cart from 5 to 10% - a dry and business focussed goal - try Help customers discover our complete assortment, thereby increasing add to cart from 5 to 10%. Now you clearly state the benefit to your user.
Focus on relative growth rates
If you set absolute growth goals, the derivative decreases with each step. This means your growth is slowing down. Focus on % improvements instead.
Monitor new cohorts
It will be easier to spot changes to your metrics if you focus on new cohorts. It has the added benefit of making measurements cleaner. This doesn’t mean you can forget about the aggregate; keep monitoring that to ensure it doesn’t crash due to your changes.

Using your goals

Setting goals is not the end, it’s just the start. I see too many strategy documents etc. not being used. The same goes for lofty goals. To really get value from the goals you set, you need to operationalize them. Here’s how you do that:

Get buy-in
Make other people care about that goal as much as you do
Consistently monitor
Make it part of your product review or your team’s week start. Escalate if you're not hitting your goals.
Prioritize initiative against goals
Actually, use your goals as a tool for decision-making. Apart from better decisions, this will constantly enforce the importance of your goals.
Revisit goals
Your goal-setting will not be perfect. Don’t be afraid to revisit your goals when needed. Reviewing if you have set the right goal at the right can be part of your quarterly review.

Recap

Goals are powerful tools to align your team to achieve great outcomes. Unlock their full potential by:

Picking the right thing to focus on
Simplify your work by picking one (or a few) metrics to optimize for. Make sure they are important for your business, in your team’s control, and easy to measure.
You can use this template to do so
Setting the right target
Try to find the natural limit for your goals; how fast or far can you go?
Operationalizing it
Setting goals is just the start. Create ownership by setting up dashboards and reviews. Celebrate your wins, and escalate when you are not hitting goals. Prioritize initiatives against goals to make sure you are working on the right thing, and to reinforce the importance of your goals.

Thanks for reading. If you enjoyed it, share this article with someone to whom it might be helpful, and help me hit my growth goals ;)

Best, Willem