Revising Targets: A CFO’s Perspective on Strategic Adjustments in Startups
As we enter the second half of the year, it’s time to assess progress and recalibrate where necessary. For many startups, this juncture can be a critical moment. While it’s always tempting to push forward with optimism, the reality of progress—or the lack thereof—can often reveal a need for course correction. Startups, by nature, operate in environments of uncertainty, and setting accurate and achievable targets can often be a delicate balancing act. When there are investors involved or when capital is being raised, the pressure to set ambitious and optimistic goals intensifies.
However, one of the fundamental challenges that startup leaders frequently encounter is how to handle the situation when it becomes evident that the company will not hit its original targets. This is a particularly pressing dilemma. On the one hand, there is the school of thought that targets, once set, must be adhered to, no matter the circumstances. Accountability is key, and deviating from these set goals can be seen as a failure to follow through. On the other hand, there is a more pragmatic perspective that suggests recalibrating targets when the initial ones are no longer feasible—especially if the gap between reality and goals is too wide to overcome.
As a CFO with extensive experience working in startups, I firmly align myself with the latter view. While accountability is undoubtedly crucial, it is equally important to acknowledge the dynamic and evolving nature of a startup’s journey. Startups are small, often agile entities with teams that are both highly intelligent and deeply invested in the company’s success. These individuals are not naive, and they can quickly recognize when unrealistic goals are set before them. To persist in pursuing such targets, especially when the likelihood of achieving them is minimal, is not only unproductive—it risks demotivating your team and eroding the trust that exists between management and staff.
Understanding the Core Problem: The Importance of Diagnosis
The first step in adjusting targets is not to rush into changes, but to conduct a thorough diagnostic. As a CFO, I have always emphasized the importance of a post-mortem when things don’t go according to plan. This is a crucial step in understanding where things went wrong. Why did we miss our targets? Was it a result of overly ambitious expectations? Were the targets set based on insufficient data or over-optimism about market conditions? Or, on the other hand, did we face unforeseen challenges that impacted performance?
It’s essential to involve the entire team in this diagnostic process, or at least as much of the team as is feasible. The key is to gather insights from various perspectives within the organization, including those who are closest to the day-to-day operations and those responsible for sales, marketing, or product development. An open and honest dialogue can help to identify whether the targets themselves were the root cause of the shortfall, or whether external factors or execution issues were at play.
If the targets were indeed unrealistic, then the root question is: how did we end up in this position? Was it a strategic oversight, or did it stem from the pressure of needing to show bold ambitions to investors? Understanding the underlying causes of why the targets were set in the first place is essential for any successful recalibration. If the diagnosis reveals that the goals were set based on faulty assumptions or an unrealistic understanding of market conditions, this becomes a valuable learning experience that can be applied to future target-setting processes.
However, if the targets were reasonable but not met due to factors within the company’s control, then this suggests a different type of problem. It may indicate issues with execution, resource allocation, or team performance. This diagnostic process is crucial because it helps leaders not only to adjust the targets but also to identify areas that need improvement and to take corrective action.
The Philosophy of Resetting Targets: Flexibility in Strategy
Once a thorough diagnosis has been made, it is time to move toward resetting the targets. As a CFO, I believe in the importance of being flexible with strategy, especially in a startup environment. The road to success is rarely linear, and the ability to adapt is a defining characteristic of successful startups. When resetting targets, it’s crucial to take into account the lessons learned from the diagnostic phase, as well as any new data or insights that have emerged.
At this stage, it’s essential to have open and transparent communication with the board and investors. Resetting targets should not be seen as an indication of failure, but rather as a strategic adjustment based on real-world conditions. Investors, especially those with experience in the startup ecosystem, understand the inherent risks and volatility of early-stage companies. By clearly explaining the rationale for adjusting targets, you demonstrate not only a clear-eyed view of the company’s current position but also a commitment to sustainable growth and long-term success.
However, it’s important to approach this process with caution. While resetting targets can be an opportunity to recalibrate and refocus, it should not be done recklessly or too frequently. The act of resetting goals too often can send the wrong message to the team, investors, and stakeholders. It can create an impression of instability or a lack of direction. Therefore, resetting targets should be a well-considered decision that is made after a thorough analysis, with a clear plan for how the new targets will be achieved.
Communicating the Change: Transparency and Trust
Once the new targets have been set, it is crucial to communicate this change effectively across the organization. Ideally, the entire team should be involved in the diagnostic phase, but even if that is not possible, it is essential to ensure that everyone understands why the targets are changing and what the new expectations are.
Effective communication is key to maintaining morale and trust within the team. Employees need to understand that the decision to adjust targets is not a reflection of failure but rather a strategic response to changing conditions. This transparency fosters an environment of trust and accountability, which are vital in a startup culture. When team members feel that they are being treated with respect and that leadership is making informed decisions, they are more likely to remain motivated and committed to achieving the revised goals.
Moreover, this communication should also extend to external stakeholders, including investors, partners, and any other parties with a vested interest in the company’s success. Being upfront about the reasons for the target revision and outlining the company’s plan for moving forward can strengthen relationships and demonstrate the leadership’s ability to make tough but necessary decisions.
Maintaining Incentives: Navigating the Partial Mulligan
One of the most delicate aspects of resetting targets involves dealing with compensation structures tied to performance. In many cases, employees’ bonuses, stock options, or other forms of incentive compensation are tied directly to the achievement of specific targets. When those targets are adjusted, it’s essential to strike a balance between maintaining motivation and ensuring fairness.
For employees who have been working diligently toward achieving the original targets, adjusting those goals should not come without consequences. A simple “mulligan”—a free pass—undermines the integrity of the incentive structure. If targets are lowered, then the incentives tied to those targets should be recalibrated as well. This ensures that employees remain motivated to hit the new targets and that the system retains its effectiveness.
However, it’s important to be mindful of the reasons behind the shortfall. If the targets were adjusted due to unforeseen market conditions or external factors beyond the company’s control, then it may be appropriate to offer some leniency in the recalibration of incentives. On the other hand, if the targets were missed due to internal inefficiencies or underperformance, then resetting the targets without adjusting incentives could undermine the company’s accountability structure.
Conclusion: Embracing Change as a Strategic Necessity
The process of resetting targets in a startup environment is rarely simple, but it is an essential aspect of navigating the uncertainties of the entrepreneurial journey. As CFO, it is my responsibility not only to manage the company’s finances but also to ensure that we set realistic and achievable goals that align with the company’s current capabilities and market conditions. The decision to revise targets should not be seen as a failure, but rather as an opportunity for growth and reflection.
In many ways, this process is reflective of a larger philosophical truth about startups and business in general: the ability to adapt is more important than the ability to predict. While forecasting and planning are essential, it is the flexibility to pivot and adjust when necessary that separates successful companies from those that falter. A startup’s true strength lies not in its ability to meet every original target, but in its capacity to learn from its experiences and recalibrate its strategy to ensure long-term success.
Ultimately, revising targets is not a sign of weakness or failure. It is, in fact, a manifestation of strategic foresight—recognizing when conditions have changed and making the necessary adjustments to maintain momentum and drive success. In this way, the process of resetting targets becomes not only a tactical decision but a vital part of a company’s philosophical approach to growth and innovation.