Understanding the difference between mastery goals and performance goals will boost motivation and focus on long-term growth.
The more time I spend thinking about how to improve company growth, and build businesses that are more impactful, profitable and sustainable, the more I realise the importance of understanding the psychology of the people running those companies. Only then can we set goals for growth that are realistic and motivating. And that’s what’s required to make the right investments in marketing, the team and operations.
There’s a very valuable concept in the psychology of motivation, to distinguish between two types of goals: mastery goals and performance goals. Company leaders can make use of this to improve their growth strategy and increase the motivation of the team, and ultimately build more successful businesses.
There’s a right place for each type of goal, but an effective combination of mastery and performance goals is what improves growth rates and profitability.
The two different types of goals
Mastery goals focus on learning and building on the existing strengths of the business. They relate to the processes and knowledge you need to run a lasting, profitable company. Performance goals, on the other hand, are those more easily measurable indicators of financial success.
What are they?
- Profitability of growth marketing: the knowledge how to acquire and retain customers profitably
- Positive unit economics at a given scale of the business
- Resilience: the level of organic growth, customer loyalty and referral rates
- Revenue or customer growth
- Market share
- Amount of funding raised
Internalised business goals improve motivation and focus
One big difference between the two is that hitting performance goals relies on people outside the business to do things that are partly out of your control. It ultimately needs a bit of luck for a customer to choose your product over a competitor, or an investor to recognise the strength of your growth framework.
In contrast, mastery goals are ‘internalised’ goals, in that you can work towards them from within the team and business. That’s why they have the potential to drive motivation and focus on the right set of marketing and growth activities.
Prioritise the milestones for growth
Mastery goals relate directly to the milestones the business really has to hit in order to survive and get to the next level of development. For example, proving scalability to raise follow-on funding, improving the product to a point where you can take on external partners, etc.
Compared to picking sales or valuation targets that seem somewhat arbitrary, choosing meaningful Mastery goals will make them more tangible to everyone involved. Again, this increases team motivation and the likelihood of achieving them.
This will also keep you focused on improving the things that’ll make your business thrive in the long-term, such as your knowledge of your customers and the effectiveness of your growth framework.
The right combination of both types of goals
Of course there’s a lot of pressure on founders and leaders to show progress in the short-term. Which is why setting good performance goals still matters. This will help you get very clear on the minimum level of revenue or customer growth you need to keep the business alive.
You can check progress in commercial terms against your performance goals, and they’re just required to communicate to investors or partners. It’s also very easy to measure and keep track of your key financial performance metrics, compared to those related to mastery goals.
When building the right combination of mastery and performance goals, it’s usually best to prioritise mastery goals, but keep in mind how they need to translate into financial performance goals. Improving your marketing, customer insights and brand have to lead to better financials, otherwise they’re not the right goals or not specific enough.
Long-term mastery and short-term performance
A lot of companies struggle with setting long-term targets. They might try to predict their performance too far into the future which just makes it seem unrealistic. Or instead, they pick some big numbers based on what investors might want to see or what competitors have done. In either case they’re missing out on having a set of long-term goals that really focus the day-to-day and motivate the team.
Mastery goals make for much better long-term goals. They don’t need complicated models or tenuous assumptions, but instead focus the team and company on improving the business fundamentals.
You can then break these down into a set of short-term goals, usually for the next 3-6 months, including some mastery and some performance goals. It’s much easier to project your customer or revenue growth for a few months than a few years. Just make sure to still prioritise learning and improvement, rather than just trying to show increasing financial metrics. They’re much more likely to happen when you focus on the fundamentals.