The Two Types of Goals Founders NEED to Have
As Founders of high-growth companies, there are TWO types of goals we need to focus on and measure. The problem is that we usually focus on one.
The two types are LAG measures and LEAD measures.
Lag Measures are outputs or outcomes: the results of our business such as revenues, gross margins, EBITDA, CLTV, etc.
Lead Measures are inputs and levers: the decisions or actions that can predict and influence progress of the Lag Measures.
A common approach with goal-setting in our companies is to focus ONLY on the Lag Measure. The problem is that this doesn’t force us to think about, measure, and keep ourselves accountable to the Lead Measures that might actually indicate progress towards the Lag Measure.
There are two types of Lead Measures:
Decision-driven - i.e., those that can be implemented with a decision
Action-driven - i.e., those that require consistent, repeatable actions or processes.
For example, many high-growth companies need to increase their revenues through a sales team. If the Lag Measure is a revenue target, the lead measures could be:
DECISION-driven Lead Measures by the executive team to increase product prices, change pricing tiers, bundle products, etc.
ACTION-driven Lead Measures for the sales team such as making a total number of lead calls per week, spending a certain amount of time per call listening to and discovering customers’ problems, using specific key words or language in calls, ensuring a specific number of follow-ups with a lead, etc.
Action-driven Lead Measures are more difficult to implement because they require a change of behavior. They are also more difficult to measure because they may require self-reporting and more consistent accountability.
But action-driven Lead Measures are also the ones that are completely within our control.
And if we are willing to commit and experiment with a particular set of Lead Measures over a given period of time, we position ourselves to iterate and learn what processes give us the best chance of moving towards our most important goals.
Reflection Questions:
Have I (or have I worked with my leadership team) to select and focus on the MOST important goal (lag measure)? If not, what would it be?
Does each team or individual know how they contribute or support the most important goal?
For each lag measure, does each team or individual have a set of clearly defined Lead-Measures?
How are the lag and lead measures being tracked?