We had missed our quarterly sales target. Again.
The news was given during a company all-hands. All over the room, I saw people staring at our CEO, not sure how to react. Frustrated, confused, and scared.
We had extremely ambitious targets to begin with, as is the case with most VC backed companies. Most individuals knew we’d be lucky to meet them. Yet as results were announced, we all felt like failures.
In the following weeks, the mood in the house was grimmer than usual. People were doubting the company’s ability to succeed, ever. Many feared losing their job as this downtrend continued.
Personally, the bad news didn’t surprise me, nor did it hurt my optimism. I never expected to hit those numbers, knowing full well they were best-case scenarios. They were not set based on what we could realistically achieve, but rather on numbers investors wanted to see (~somewhat imaginary). So it didn’t affect my outlook of the future. I knew we had a strong team and we did the best we could.
To help my team get back on track, I set up a meeting and said something along the lines of:
“Team, I know that some of you are feeling grim about the fact that we missed our sales targets again. I’m not going tell you that things will be better in the future or that the sales team will do better next quarter. I can’t predict the future.
However, I will remind you of the reason all of us are here for. Every single one of you told me that you wanted to join a startup to make an impact and to learn by doing. And the only promise that I ever made to you is that you’ll be able to do both. Does anyone in this room feel cheated by my promise?
Nobody ever promised you that it’d be an easy ride. In fact, you knew from the beginning that it was going to be a challenging and chaotic ride. Yet you still joined.
Many of us are doing things for the first time. It’s my first time leading a team. It’s our founders’ first company. For many of you, it’s your first job. So I don’t expect us to always get things right.
What I do expect of all of us is to work hard and work smart. To never let bad news and missed results beat us down. To always get back up and continue our journey.
We’re all here to do one thing and one thing only: Give out best shot. So I don’t care if we missed our targets. Let’s focus on the day-to-day and do our best.”
My point isn’t that a pep talk will fix things. Rather, it’s that people are too emotionally and mentally attached to results. So much so that when they fail to achieve their goals, regardless of how realistic it was, they lose confidence. I needed to remind my team that hitting targets, winning deals, and achieving milestones only play a small part in our overall success. It’s our day-to-day work, the time that we spend grinding and planning, that matters.
We missed our targets. So what?
I attribute our team’s grim reaction to prevalence of a fixed mindset in our culture.
[To quickly remind readers of the meaning of a fixed mindset versus a growth mindset, allow me to quote Carol Dweck (top researcher on the subject): “Individuals who believe their talents can be developed (through hard work, good strategies, and input from others) have a growth mindset. They tend to achieve more than those with a more fixed mindset (those who believe their talents are innate gifts).” I find it fascinating how these two mindsets affect how we approach life. To learn more, I highly recommend readers to checkout Mrs. Dweck’s book: Mindset.]
In my opinion, people with a growth mindset would look at the missed targets and say to themselves: “Well, looks like there’s more work to do and things to learn. Let’s try harder.” On the other hand, a person with a fixed mindset would say: “Shit. Maybe we’re just not cut for this.”
I like to think I have a growth mindset, and that my team does as well. Yet fact is many of my colleagues have quite fixed mindsets. I don’t blame them for it. It’s my opinion they’ve received too many praises supporting a fixed mindset.
Allow me to elaborate… Every time that we compliment someone with “Wow, you’re so good at…” or “You were really born to do…,” it gives the impression that success is tied to who that individual is. Their genetics. How they’re wired. It couldn’t be more wrong. Ask anyone successful and they’ll tell you that success comes from thousands of hours of practice, bouncing back from failure, and many iterations. To quote Thomas Edison: “Success is 99% perspiration.” If that’s not enough evidence, I highly recommend Malcolm Gladwell’s book Outliers, which argues that it takes 10,000 hours to master anything. I believe that. I also acknowledge that some people are better positioned to achieve those 10,000 hours faster than others, but nobody said that life was fair. The point being that success is correlated to work and effort, not simply our genes.
Are targets detrimental to the team’s motivation?
No. Targets are absolutely necessary.
Targets and goals provide direction to our teams and help gauge our progress. Without them, we’d be all running in different directions and without a clue about whether or not we’re successful.
But hitting our targets is not the only thing form of success out there. People need to feel good for having tried really hard and giving their best.
How do we prevent missed expectations from de-motivating our team?
In my opinion, it comes down to setting realistic goals, having an underdog mindset, and rewarding a growth mindset. Let’s explore each in detail:
Set realistic targets
Set targets too high and we’re bound to miss them. Team members will feel like we’re asking the impossible. Set targets too low and the team loses the ambition to achieve more (they’re already there, why try harder?). I thus recommend to set targets slightly higher than what we can achieve today.
For example, if we forecast $100 in revenue based on historical performance, and $150 in revenue under a best-case scenario, I’d set our target as a range between $120 and $150. I’d proportionally increase the reward should we hit higher than $120. This challenges the team to do more than they have done historically, while incentivising even better results should they actually hit the lower goal.
If the team fails to meet the target in their first try, I’d keep the target unchanged until we achieve it. The goal is to keep learning and iterating until we succeed. The critical part of this approach is learning how to leverage scenario planning to set targets, instead of forecasting based on the best possible outcome. I thus recommend checking out author and VC Guy Kawasaki’s Art of the Start, which has a great section on how to set realistic goals from the bottom up.
Maintain an underdog culture
The moment that we think we’re successful is the moment that we stop trying.
I therefore believe we need to support an underdog mindset. We need to feel like we’re always chasing a bigger fish with limited resources. We cannot be too positive in our assessment of the company – the best underdogs feel that they’re behind and need to work harder.
For example, we need to avoid saying things like: “We have a ton of money in the bank from our investors;” or “We’re growing faster than any competitor in the field, ahead of the game by a good margin.” Even if these statements were true, it creates the perception that we’re successful and can relax a bit.
In addition to saying the right things, we also have to act like underdogs. Buying $2,500 Macbooks for everyone, giving free lunches and craft beers, and stocking the office with $1,000 chairs and standing desks does not paint the picture of an underdog company. These “perks” create a culture of entitlement, where people fail to value what they have, and perceive that they are in a pretty comfortable spot.
We don’t want our people to feel comfortable. We want our teams to feel like their survival is at risk. We need people to work hard to win. If we’re going to give perks, people need to earn it: e.g. Food should only be offered when there’s progress to celebrate, like when the team pulled an all nighter, or made an awesome attempt at hitting their goals.
We can’t give anything for free.
Praise effort and progress
Creating a growth mindset culture starts by praising team members’ daily effort. As leaders, we need to make the time to observe team members regularly.
A couple years ago, I’d only high five people when they hit their targets (which meant rarely), and had 0 hours dedicated to observe and praise people. Little did I know that I was actually supporting a fixed mindset.
Nowadays, I spend at least 30min to an hour every day to see if team members are trying harder than usual, and praise people’s efforts. For example, if I see someone is practicing ahead of a presentation, I’d stop by and say “Hey, I see that you’re working hard on the presentation. Feel confident yet?” Or if I see team members brainstorming solutions to a problem, I’d approach them before the end of day and say “I saw you spending a good amount of time brainstorming in that room with so and so. Looked like there were some good ideas on the whiteboard. How are you feeling?”
Let’s observe team members when they fail to achieve a goal. Are they optimistic and already thinking about how to improve, or are they simply feeling down?
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