All the warnings about the forthcoming next nuclear winter for startups drive home the need for a management system. Tough times call for tough measures, but that doesn’t mean CEOs should get carte blanche for discretionary cuts — a sure way to undermine morale.

Among other things, having a management process in place sets the stage for making cuts when they need to be made. Why? Because even without resorting to old-school ranking-and-rating, in a good management system, performances (and non-performances) are visible company-wide.

I’m still stunned at how many companies operate without a management process of some kind. Not just a plan . . . but a regularly recurring process, with weekly monitoring, that ensures critical company milestones are met — and leads to consequences if it’s not.

So if you haven’t got one, now is a helluva good time to get started on a planning/management process. If your company has one in place, dramatic events may call for a mid-cycle re-plan.

The argument for doing quarterly planning is its horizon — it’s hard to see much beyond 13 weeks. Who can really say they know what conditions will be like come January 1, 2009? Much less for a 3- or 5-year plan.

(Which is not to say your company doesn’t need long-term goals. VCs usually only want to see 3- to 5-year plans as a reality check (or sanity check). They know better than anyone that even the startups that succeed rarely do so by adhering to the plan they funded. But it’s a good test for founders, to articulate whether they have their sites set on a profitable $15M business two years out . . . or are going for global domination of mobile advertising by Year 5.)

Back to quarterly planning — and in particular the elements of Quarterly Objectives and Key Results that I brought up in the last post. Although the process needs to evolve within any company, the basic premises are three:

1. Top-management expectations come first. Could be just a one-sheet with simple but clear expectations for, say, sales, shipments, user registrations, feature releases — whatever the major performance metrics for the quarter are. Whether or not there’s a board of directors asking for it, it’s the CEO’s job.

2. Every exempt employee prepares a set of Objectives & Key Results. If the company is big enough to have departments, employees work with their managers to develop them — four to six Objectives with four to six Key Results (more on these below).

3. After each quarter, Objectives are reviewed and self-graded, and next quarter’s are proposed, in a peer setting. Key here is that each employee acknowledges what happened last quarter — and what they’ll do next quarter — in the presence of their peers.

Now, some are you are sitting there saying, “Sounds like big-company bullshit.” To which I say, “Bullshit.” (Touché!) Do you really think everyone working hard, with a good attitude is a way to ensure milestones are met? To ensure that roles, much less departments, are coordinated? No. Not only is there too much to keep in any one’s head, but things change. All the time. If you have your eye on the goal — pin it to the wall in front of you — and you monitor weekly, big surprises are far less likely.

“Inch by inch is a cinch — yard by yard is hard”

Corny, but it makes a point: monitor progress every week.

I won’t suggest that even this ‘simple’process I’m recommending isn’t pain-free. There are usually several iterations, especially when multiple departments (engineering, marketing, sales) dependencies are getting sorted out (“I can’t launch Week 44 unless Tom agrees to freeze code by Week 40″)

But at the end of the exercise, every employee — the CEO is not exempt — has a roadmap of the most important things for them to focus on over the next 13 weeks.

I can’t emphasize how effective this process (or one like it) is in not only getting things done, but in maintaining employee morale. There’s no hiding, no slacking — everyone’s work is visible. No more “What the hell does Chris do?” Everyone’s Objectives are on the server (or intranet, or Basecamp, or whatever you’re using). And every week at your staff meeting (what — you still don’t believe in meetings?), all the Objectives (sorted by week) are checked off . . . again, in front of peers. (Peer performance is a great motivator — no one wants to show up for Monday morning’s meeting and get marked ‘Not Done’in front of others.)

What the Docs Look Like

Though few words, drafting of Objectives and Key Results takes some time to get the hang of. In general, I would describe each employee’s four- to six-page document as:

‘A guide which, if 75% to 85% achieved, would signify successful execution for the quarter.’

Why only 75% to 85%? Because everyone should have stretch goals . . . and therefore should not be expected to hit 100% of them.

So how is each Objective expressed? It should be broad, categorical, and have no dates. Examples might be ‘RELEASE v1.5,’or ‘SECURE MANUFACTURING PARTNERSHIP,’or ‘GROW SALES AT LEAST 10% Y/Y,’or ‘COMMENCE PATENT PROCESS,’or ‘EXPAND DEVELOPMENT TEAM.’ They’re allowed to sound vague — they’re the Big Efforts, and each individual should have at most six. Any more, and people are being set up to fail. Put each one at the top of a separate page.

The steps — specific milestones — to achieving each Objective — are quantified by Key Results, which are measurable, and include dates (in our work-week format). Again, try to have four to six of them. So your CTO’s Objective ‘RELEASE v1.5′ might have the following Key Results: ‘FREEZE CODE W40,’‘COMPLETE QA W43,’‘COMPLETE USER TESTING W47,’‘FINAL REVISION W49,’‘BLOG RELEASE NOTES W50, and ‘UPLOAD v1.5 W51′ (although a Christmas release may be unduly harsh on your development team).

The idea is to give focus your very busy people on the few items — Objectives — that really matter. An while Objectives are mostly vague, Key Results use specific action verbs — ‘COMPLETE,’‘HIRE,’‘ANNOUNCE,’not ‘Continue,’Investigate,’‘Study,’etc. — so that there’s no ambiguity as to what ‘Done’means.

There’s much more than can be spelled out here. And many ways to skin this cat. (Apologies to cat lovers.) Finally, while this is an example of a process to help keep the company’s execution on track, there’s another dimension (which I’ll address in a subsequent post): people management. They’re not the same.

Especially in these dark days, this is intended to get you thinking about taking real steps to get your team to pull together and sharpen execution — even if there are only two of you. Exercises like this force you to articulate your thinking, and you’ll be surprised how often your partners, whom you talk to every day, are surprised.

If you’d like to receive a more detailed description and examples of Quarterly Objectives and Key Results, email me at rcapece at technosailor dot com.