From the course: Jeff Weiner on Leading like a CEO

Vision to values: Objectives

From the course: Jeff Weiner on Leading like a CEO

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Vision to values: Objectives

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- Okay, once you have your priorities in place, you want to establish measurable goals. Hewlett Packard, I think they had a product called a Spectrometer and it measured stuff. I don't even know what it measured and the tagline was something along the lines of if you can't measure it, you can't fix it and David loved that line and he taught that to me while we worked together at Yahoo and then I brought him over here and that became one of our first principles. If you can't measure it, you can't fix it. And that's one of the reasons you need these measurable objectives. 'Cause if you go to the trouble to do everything that came before objectives, but you're not measuring how you're doing, you're not going to be able to course correct. You're not going to know when to double down and when to shift resources and when to deprioritize or reprioritize. So measurable objectives, absolutely essential. The fewer measurable objectives, the better. For the same reason that if I can only do one priority, that's all we'd be doing. It's like a mancha, less is more in this context. And I would encourage all of you, when you are defining your vision to values, when you're thinking about what you're doing, to really think through your metrics. So, you want to make sure with regard to your measurable goals first and foremost, that you're thinking through the unintended consequences. Once you put this measurable goal on a piece of paper, once you get up on stage and start communicating it more broadly, guess what your team's going to do? They're going to optimize for your measurable goal. And if they're doing that at the expense of some other really important stuff, you're going to have a problem on your hand. You're also going to have people optimizes euphemistic. What's another way of saying optimize? Game, they're going to game stuff man. They're going to game stuff, human beings game stuff. They like to solve for specific things. What happens when their compensation is in some part tied to a measurable goal? What happens if their promotion is tied to a measurable goal? What happens if that's not even the way you think about it, as their manager but they think you think like that? Then they are optimizing in a big way, right? To meet or beat those goals. So if you haven't thought through the potential unintended consequences of that, highly recommend that you do. This is one of the reasons it may be quite challenging to just fixate on one thing. But if you can round that one thing out with as few other things as possible, you're going to be in a better position to reduce if not eliminate, some of those potential unintended consequences. And so you really want to make sure that you're optimizing. This time it really is optimizing, for both growth and profitability. There's a rule of thumb that's emerged more recently, very timely question, kind of a rule of 40. A loose rule of 40 that Wall Street has started to apply and some of the private equity folks who are venture capitalists. Later stage companies, certainly companies that have achieved scale. Investors are looking for a combination of growth and profitability margin that when added together exceed the number 40. Twenty percent growth, twenty percent margins. Forty percent growth, break even. The belief ostensibly, is that if you're growing faster and you're achieving scale benefits that over time, you'll be able to expand your margins. So there's a potential trade up. So that's one interesting rule of thumb that I have been less familiar with until very recently. You know, around the turn of the last century, you know, around 1999, 2000, I think people got a little too caught up with growth at the exclusion of profitability and were essentially selling dollars for 99 cents and that doesn't scale over time. No matter how big you get. So you just have to be mindful of that.

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