This simple but powerful reporting structure will help your team get straight to the point, increasing transparency and collaboration.
In small, co-located teams, you can get away with a relaxed approach to reporting. Everyone can see and hear what’s going on as it happens, and group announcements can be made merely by speaking in a loud voice.
However, as teams grow, so does the need for more structured forms of communication, such as weekly update meetings in which team members report their progress to one another. Get this meeting right and you’ll rocket towards your goals . . . but get it wrong and you risk missing your target altogether.
My leadership meetings could sometimes be a bit ad-hoc. Usually, each teammate was allocated a certain amount of time to provide an update on their area of the business, but some meetings were highly structured, while others were less so — and some regularly went off on tangents.
If targets were hit, things moved quickly. When targets weren’t hit (which, let’s face it, happens a lot), team members presented a brief explanation before describing a rosy future in which a miraculous turnaround was expected. At least, that’s what happened if the meeting didn’t deteriorate into a mudslinging free-for-all.
I often left these meetings feeling slightly concerned. Did the team really know what was expected of them?
Good reporting does more than inform your team about what’s happening in the business; it also focuses their attention on what’s important. As leaders, it’s our job to reiterate this as much as possible, to keep the team focused on the right things.
Realising that we needed more structure to get the most out of our time together, I set about creating a tighter agenda to help people get to the heart of issues faster, which allowed us more time to collaborate as a team.
A report contains two components — metrics and predefined questions — so let’s see how each of these can be used to build effective reporting.
A starting point for effective reporting is to define the most important metric in the business, often called the North Star Metric. For example, Facebook’s North Star Metric is the number of daily active users. Amazon’s North Star Metric is cash flow.
Every team member on my leadership team has one primary metric that I call the One Metric That Matters (OMTM). There is a mathematical relationship between the OMTM and the North Star Metric, so when the team improves their OMTM, the North Star Metric is guaranteed to improve.
Since processes and strategies will change over time, it’s better to choose OMTMs that measure outcomes, rather than process output. It’s not easy to figure out the most important metric for a team or team member (nobody said it was going to be easy), but when you figure it out, it’s extremely clarifying.
Examples of OMTM include:
To support the OMTM, a dashboard of three to four KPIs is created to provide transparency over operations. Unlike the OMTM, KPIs can be process outputs. For example, in sales this might be:
While operational KPIs may or may not have explicit targets, they inevitably drive people’s behaviours by revealing what they are doing. As operational strategies change, so do the KPIs which provide the most transparency.
The second — and less common — part of my reporting structure lists a set of predefined questions for my team to answer in the meeting. Questions have the power to direct people’s focus, but they’re also a great way to set your expectations for the team.
To determine the questions you should ask, try the following thought experiment. Imagine yourself in the reporting meeting and you learn that the OMTM is below target. What questions would you ask to assess whether it was because the team member’s performance was poor or the target was too high?
Exercises like this require some mental gymnastics, but thinking through the worst case scenario can reveal your expectations of what ‘well done’ looks like. Here are some examples of questions you might ask:
Asking these questions upfront sets expectations and gives everyone a chance to prepare, making for a much faster — and more engaging — report.
How do you set targets when you have no historical data? Sure, you have a financial model with an assumption about what the target should be . . . but is it realistic? There is only one way to find out. Use the first month of tracking your OMTMs to calibrate what’s possible.
I’ve seen teams discover that their original assumptions are out of whack with reality by a factor of 10, yet still use those original assumptions for future targets. When the target is never achieved, the team get demotivated. Reality always wins.
A simpler approach is to make your target the best performance from previous periods. That way, every month needs to get a little bit better.
Since targets are so brittle in an early-stage startup, meeting expectations can be a more realistic indicator of performance. That’s why asking questions and setting clear expectations is so important. I’d prefer to have a teammate miss their target but meet all of my expectations. Why? Because the target may well be wrong.
By defining which metrics to present and which questions to answer ahead of time, each team member knows exactly what’s expected of them. This allows you to listen to what people are saying and ask more questions as necessary. By increasing the efficiency and quality of updates, you’ll have more time to collaborate and connect as a group.
After all, when you have your best minds together in one place, you’d better make the most of it.
Thoughtful essays on growing teams, building products and raising money by Serial Entrepreneur and Investor, David Bailey.