Doing what is needed to achieve the plan vs doing what is rightPosted: September 19, 2014
Ever so slowly, probably without really noticing, a lot of startups will find themselves in a situation where the team is blindly executing to achieve whatever numbers are in the plan / budget they agreed on with their board. This usually comes out of fear of not wanting to disappoint the board or to avoid tough, more fundamental discussions. This is mostly the board’s fault, for not encouraging open and frank discussions; it is a vicious cycle that always ends in tears.
Whereas as I have nothing against companies achieving their plans / budget, I have also noted over the years that static plans / budgets, usually over 6 months old, aren’t particular good guidebooks to building and growing a company. I know this is from the church of the bleeding obvious but I see it all the time.
So these are some of the things that can happen if you execute purely to achieve your plan vs doing what is right:
- You have a bad activation and retention rate. You should be stepping back and fixing product. But you are so desperate to reach your sign-up targets that you just fire off lots of growth measures. You wasted ammo and trust me your numbers will come right down again once the hot air is out of the system. But, you may just make those quarterly sign-up goals in time for the board meeting.
- You just aren’t ready yet for that outside expensive VP of sales. You have some work to do in terms of making your product more attractive and sell-able to enterprises. But you promised your board you would hire this VP of sales this quarter, so you go and do just that. That person joins and is bound to totally fail at their job; frustration all around. They would have done a great job just 2 quarters later.
- You could grow your market place / network much quicker if you radically reduced your pricing. You will profit from this substantially in the long run. However that would reduce your revenues by 50% and you would be a long way away from that “$5m run-rate” you wanted to achieve next quarter. So you keep your pricing and have given up long-term category leadership for near term (meaningless) financial rewards.
All of this piles up really quickly. The hole you are digging gets deeper and deeper and before you know it the only way out is a major re-set of everything (also the board – entrepreneur relationship); we all may not recover once we start spinning like that.
So one of the things I learned is that right from the get-go in our VC – entrepreneurship we need to have the understanding that we are going to always do ‘the right thing’ to achieve our long-term goals. We are always going to be open, always willing to step back and re-think everything if it must be.
I know this view can be overly romantic. Sometimes (esp. around fundraising) you just have to do some ‘lord dark’ moves. But I don’t like it and I don’t think it’s good and I think we should be trying really hard to do what is right, not what is in the plan.