quarterly operating reviews: moving your business forward by looking back

QUARTERLY OPERATING REVIEWS:Moving Your Business Forward by Looking Back

TABLE OF CONTENTS

Foreword .............................................................................................................................. 1

Understanding Operating Reviews:

What Are They and Why Are They Important?........................................................................... 2

Operating Reviews Defined.......................................................................................................2

The Benefits of Operating Reviews ............................................................................................3

Customizing Your Approach to Match Your Company ..................................................................5

Preparation, Execution, and Assessment: Key Steps to Conducting Successful Operating Reviews .....6

6 Preparatory Practices That Will Improve Execution ..................................................................6

A Few Basic Rules for Quarterly Operating Review Execution .....................................................11

Properly Assessing Operating Review Performance ...................................................................11

Common Operating Review Challenges and Solutions to Overcome Them ................................. 12

The Road Ahead: Checklists and Additional Resources to Get You Up and Running ................... 15

Checklist for the CEO ...........................................................................................................16

Checklist for the CFO ...........................................................................................................17

Checklist for the Unit Head Leading the Operating Review ........................................................18

Checklist for the Meeting Participants .....................................................................................20

Checklist for the Facilitator ....................................................................................................21

Operating Review Assessment ................................................................................................22

Additional Resources .............................................................................................................26

Quarterly Operating Reviews: Moving Your Business Forward by Looking Back | 1

They wanted to create something exciting and meaningful that could impact or disrupt a particular market. They hoped

to build a highly effective, cohesive team and they aspired to grow the company efficiently and smartly, pivoting and

adjusting to respond to new opportunities or embrace new goals. If everything worked well, the company reached a level

of success that allowed it to grow.

As your company expanded, you hired more people and split the company into departments. You probably also hired

new operating heads for some of your departments as they continued to grow.

Many organizations “go sideways” at this point, as managers sometimes get stuck in the day-to-day execution of the

business and sometimes have too many goals, conflicting goals, the wrong goals, or no goals at all. They also may

have managers or employees who aren’t performing well and not even realize it. These issues lead to lower market

competitiveness, customer attrition, and the loss of their best employees.

Expansion-stage organizations need a new approach to ensuring that they have the right people and that they are

doing the right things the right way.

That’s why, instituting a quarterly operating review process — even though it takes time to assemble and conduct —

is critical, regardless of your company’s maturity. These regular reviews ultimately allow you to improve, refine, and

adjust executional performance, and equip you with the strategic direction and focus you need to achieve the goals

you set for your business.

Put simply, a quarterly operating review process, like the one we lay out in this eBook, is something you must have

in place if you are going to make the most of your company’s potential. As OpenView venture partner George Roberts

points out, given the option of a quarterly operating review or a quarterly board meeting, the operating review wins

every time. There’s no meeting that more consistently impacts the performance of a company.

“Quarterly Operating Reviews: Moving Your Business Forward by Looking Back” covers the basics of quarterly operat-

ing reviews, why they’re beneficial, how to prepare for them, and how to execute and assess each meeting. Addition-

ally, we’ve included a set of checklists that should help every person involved in quarterly operating reviews ensure

that they’ve done everything in their power to create successful meetings.

So, what are you waiting for? Let’s get started!

Scott Maxwell Senior Managing Director and Founder OpenView Venture Partners

When your business was started, there were a set of goals that were important to your founders.

FOREWORD

http://openviewpartners.com/


Effective leaders maximize the performance of their

companies by developing great aspirations (including a

mission, vision, and values) and solid long-term goals.

They then rigorously execute against those goals while

continuously iterating on them over time. As a leader,

your role is to guide this process at regular intervals

(weekly, monthly, quarterly, or annually), thereby help-

ing to ensure that you have a systematic approach to

realizing your goals and being successful.

Conducting quarterly operating reviews can get you

there by helping managers:

• Understand the current state of their company and

markets

• Identify and prioritize the best goals/initiatives for

the following quarter (i.e., the goals that will expe-

dite your company’s progress toward meeting long-

term goals)

Operating reviews are at the heart of integrating strategy

with operations and are both intuitively and analytically

derived. They also provide key stakeholders and outside

experts with a forum to examine and debate the cur-

rent state of your business as well as the top issues,

opportunities, and priorities going forward. Ultimately,

they help you determine the more important initiatives

to work on during the following quarter.

“Quarterly Operating Reviews: Moving Your Business

Forward by Looking Back” is a guide to formalizing the

process of conducting quarterly operating reviews and

— more importantly — making the most out of them. It

will show you how to guide your unit heads to prepare

the right information for these meetings, how to have

productive conversations during the reviews, and how to

assess the reviews so that you can continue to improve

the practice over time.

Understanding Operating Reviews: What Are They and Why Are They Important?

“Success isn’t a matter of

chance, but rather a mat-

ter of choice. This concept

really encapsulates why

having a clear strategic direction and

strategic plan with a focused imple-

mentation process in place is important.

Business success isn’t going to happen

by accident. You must look into the future

and create a plan for wherever you’re

trying to go.”

Erica Olsen, Co-founder and COO, M3 Planning, taken from Strategic Planning Kit for Dummies

OPERATING REVIEWS DEFINED

Operating reviews are typically quarterly meetings

(although they can also be held weekly, bi-weekly,

monthly, semi-annually, or annually) that are used to

set and prioritize operating unit-level goals for the fol-

lowing quarter.

During operating review meetings, department heads:

• Share key successes

• Describe the current state of their unit, markets, and goals

• Identify obstacles and impediments as well as ways to overcome them

• Suggest ideas for improvements

• Solicit advice from others

• Discuss possible goals for the upcoming quarter

http://labs.openviewpartners.com/ebook/what-really-matters-company-aspirations/

http://www.m3planning.com/index.php

http://www.amazon.com/Strategic-Planning-Dummies-Business-Personal/dp/1118077776


The overall objective is to develop a list of the best pos-sible goals for the following quarter based on the prep work done for the meeting and the discussion the meet-ing produces.

While the time between operating reviews can vary, this eBook focuses on quarterly operating reviews as part of a quarterly management rhythm that consists of the operating review itself plus five additional steps, all of which are conducted every three months:

Quarterly Operating Reviews. The senior manage-ment team and select outside advisors review an operating unit’s performance, current state, lon-ger-term goals, and possible goals for the unit for the following quarter.

Prioritization. Senior management prioritizes the possible goals for the following quarter.

Planning. The unit team creates initial plans for meeting prioritized goals, determines how many of them can be accomplished the following quar-ter, and determines how adjusting resources can impact the number of prioritized goals the unit accomplishes. The unit head then works with the CEO and CFO to lock in the planned goals and available resources for the quarter.

Execution. The unit team (and possibly others) executes the plans to meet the quarterly goals.

Check. The unit team monitors the progress being made against the goals.

Retrospectives. The unit team and other partici-pants reflect on the goals, initiatives, activities, and results for the prior quarter and create a pri-oritized list of adjustments that the team proposes to make the following quarter.

Integral to the quarterly management rhythm, operating reviews enable managers to more thoughtfully assess results and realign goals, strategies, staffing, and other resources. The process keeps the executive team better informed of each department’s activities, progress, goals, and needs. It also ensures that department heads are accountable and responsible, and that all departments

are aligned with the company’s strategic goals.

THE BENEFITS OF OPERATING REVIEWS

From a corporate perspective and that of the CEO, estab-lishing a quarterly rhythm for operating reviews will help you realize your most important long-term goals faster and more effectively. The power of operating reviews comes from their ability to:

• Align each operating unit’s quarterly goals with the current state of your markets, other operating units, and the company’s long-term priority goals

• Focus each operating unit on the most important goals to accomplish the following quarter and mini-mize other activities that distract from the focal points

• Ensure that each unit is clear on its goals; has the appropriate resources, confidence, and conviction to realize those goals; and has taken responsibility for achieving those goals

• Maximize the opportunity for each unit to accomplish its most important goals

For department managers, operational reviews create an opportunity to:

• Gain a clear perspective on where the department is now and where it needs to go by stepping back from day-to-day management activities to assess the unit and its goals

• Gather ideas and perspectives from other senior man-agers and outside advisors to help improve the list of goals for the following quarter

• Identify your most important goals and initiatives to move them forward over the next 90 days

• Ensure that your unit’s quarterly goals are aligned with the company’s most important long-term goals

• Agree on the resource requirements and activities from outside the department (e.g., other depart-ments, outside advisors) that will be available to help meet the goals

Many of the business benefits of operating reviews come from the work done to prepare for the meeting itself. It’s often difficult for managers to step away from day-to-day business tasks and consider the unit from a broader perspective. Operating reviews help create this discipline.

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Additionally, businesses can benefit significantly by set-ting aside time to bring their management teams, unit heads, board members, and outside advisors together to share their unique experience and perspectives. With quarterly operating reviews, each of these role players can voice their insight and help the company identify new goals or opportunities that align with the business’s overall strategy.

Another important benefit of operating reviews is that they create opportunities for the operating heads to hear from one another as well as from outside parties (board members and external advisors) whose unique experi-

ences with other companies and can be extremely useful.

Once an expansion-stage

software company raises

growth equity, it’s all about

execution — not capital.

Quarterly reviews are all about improv-

ing, adjusting, and refining executional

performance. If I had to choose between

a board meeting or an operating review

to have each quarter with our portfolio

companies, the operating review would

always win. It’s the one meeting that

consistently makes a difference in the

performance of the team.”

George Roberts, Venture Partner, OpenView Venture Partners

How Can You Improve Market Clarity?The answer is simple in theory, but difficult to achieve in practice. Companies need strong, long-term senior management level support to improve market clarity. There are four management prac-tices that will significantly raise your probability for success:

• Prioritization

• Collaboration

• Iteration

• Rigorous quarterly reviews at the senior management level

Every quarter, your company’s market clarity team needs to check its progress, reflect on the work and results to date, and determine what the best prioritized actions are to improve market clarity in the following quarter. That work should then be reviewed and discussed at the senior manage-ment level, leading to final prioritized plans that the senior management team can commit to.

The key discovery that OpenView has reaffirmed over time is that companies can actually design their growth by creating high market clarity. As you penetrate and begin to own target segments, you can use market clarity to increase and main-tain your stranglehold on those segments.

Of course, it’s only helpful if you maintain it. Market clarity is not a one-time commitment. As your com-pany grows and expands with new product offerings and new target segments, your market clarity will need to follow that same growth trajectory.

Scott Maxwell Senior Managing Director and Founder OpenView Venture Partners




An early stage company might have a single operating review meeting with the entire

team, including board members and external advisors, present to review the company’s

operations in their entirety. Early stage operating reviews might focus on product and

customer development, reviewing strategies at the same time that operations are

being reviewed.

In other words, early in a company’s development, quarterly operating reviews may

serve as both an operating and a strategic review until the company matures to

the point where it is able to execute on annual strategic planning meetings. As the

company grows and matures, the team might add additional meetings to ensure that

other areas of the company are getting adequate focus and attention.

An expansion-stage company might have an operating review for each of the CEO’s

direct reports and include the senior management team and board of directors in

each meeting. As the company grows, it might substitute certain members of the

board with specialized outside advisors for specific meetings to ensure that the team

is getting the best idea.

A large growth-stage company might have an operating review for each of its major

functional areas and business units, and include certain members of the senior

management team and specialized outside advisors at each meeting.

The remainder of this eBook focuses on operational reviews for expansion-stage

companies (generally companies with 20 to 300 employees). However, these

approaches can be customized to companies of any stage or maturity level. As with

any practice, there are many ways to execute operating reviews, so take OpenView’s

approach as a standard practice that can be customized into a best practice to meet

your particular needs.

CUSTOMIZING YOUR APPROACH TO MATCH YOUR COMPANY

Operating review meetings must be designed to align with a company’s maturity in terms of size, management sophis-

tication, and development (i.e., startup, expansion-stage, or large growth-stage company).

As with all practices, too much process and structure creates bureaucracy, while too little can lead to chaos. The trick

is to achieve the optimal level of process and structure for your company’s current state and to then adjust it over time

as the company matures. For example:

EARLY STAGE COMPANY

EXPANSION-STAGE COMPANY

LARGE GROWTH-STAGE COMPANY


Now that you understand the essence of quarterly operating reviews and why they can improve your expansion-stage business’s short- and long-term performance, it’s time to dive into how to actually prepare for, execute, and assess your own review process.

This section provides a complete list of practices that will help you better prepare for your quarterly reviews, along with some steps you need to take to execute and assess those reviews. Ultimately, this collective process will increase the holistic value of your quarterly operating reviews and significantly boost the impact that they can have on your business.

Ready to get started?

6 PREPARATORY PRACTICES THAT WILL IMPROVE EXECUTION

Vince Lombardi once famously said that the will to win is not nearly as important as the will to prepare to win. In other words, wanting to be successful at something — whether it’s football or business — is the easy part. Preparing well enough to execute the drivers of that success is the real challenge. That’s why the six practices below can be the difference between executing marginally helpful quarterly operating reviews and highly informative ones.

Don’t be alarmed if you haven’t completed all of these items before your first operating review — these practices evolve together in an iterative manner. Focus on just getting started with the operating reviews on a quarterly basis and develop these practices as you have time. Your goal should be to try to adjust and improve each of these prac-tices, as well as your overall operating review practices, on a regular basis.

Preparation, Execution, and Assessment: Key Steps to Conducting Successful Operating Reviews

1. DEVELOP LONG-TERM, COMPANY-LEVEL ASPIRATIONS AND GOALS

Since one of the outcomes of quarterly operating reviews is to ensure you are aligned with long-term goals, you need to make sure you’ve established those long-term goals in the first place. Ideally, you’ll have done that already and communicated your mission, vision, values, strategy, and annual goals for the company. You should also ensure that all department managers have a clear understanding of those goals and that they’ve clearly conveyed them to your employees.

If you don’t have your complete long-term aspirations and goals worked out, it might be good to step away

from this practice and develop them before proceed-ing. (For details on this process, check out OpenView’s eBook, What Really Matters: A Guide to Defining and Realizing Your Company’s Aspirations.)

Alternatively, you should at least set aside some time to develop and communicate three to five long-term goals (milestones) so that you have something to align your quarterly goals to. This approach works particularly well for early stage companies that have not yet locked into a specific product market and/or a specific customer seg-ment. However, it can also be useful for early expansion-stage companies that are not ready (for whatever reason) to develop a complete set of long-term goals for the company.




ENSURE EACH OPERATING UNIT UNDER-STANDS ITS LONG-TERM GOALS AND RESPONSIBILITIES

To complete this step, the CEO and CFO must lead the charge together by:

• Determining the long-term goals that each operating unit head is responsible for. Ideally, each operating head owns one of the annual goals, though the goals may need to be divided differently (e.g., disaggregate certain annual goals into their functional components and then assign them). Ensure that operating heads understand and have the skills and resources to accomplish their goals, and that they are not so over-burdened that they cannot accomplish them (two to four key goals per manager is a good rule of thumb).

• Ensuring that what it means to successfully complete each goal is clearly defined. Whatever your definition of success is, it should be easily measurable so that it’s crystal clear to everyone what achieving the goal means. Sometimes, that entails having a measure (e.g., new customer bookings) and a target (e.g., $10 million). Other times this involves something that is more binary (e.g., hiring a top VP of Customer Service by a specific date).

• Requiring unit heads to understand the importance of quarterly operating reviews. A successful review pro-cess will be difficult to implement if the unit heads aren’t giving adequate attention to the effort or don’t truly understand their responsibilities.

• Delivering draft presentations and other supporting materials to the participants well in advance of each operating review. The goal here is to make certain that ample analysis and thought have gone into devel-oping any materials being shared at quarterly review meetings. Pre-review meetings are a good venue to ensure that one-on-one feedback and guidance are given to functional managers.

• Making it clear that all unit heads must take responsi-bility for their respective goals. It’s critical to establish purpose, responsibility, and accountability through-out the organization. Having all unit heads attend the operating reviews establishes a broad understanding of the business, key dependencies, shared resource allocation issues, and shared objectives.

3. HAVE EACH OPERATING UNIT DEVELOP

ITS OPERATING SYSTEM FRAMEWORK

Each unit head (working with the CFO and, in some circumstances, the CEO and/or outside advisors) should have an objective framework in place for the unit to assess itself on a regular basis (weekly, monthly, and quarterly). Overall, there should be visible and well-communicated information available to all of the senior managers, including:

• The unit’s longer-term goals and, possibly, its aspira-tions

• A summary of the unit’s current quarterly goals and measures against those goals

• Plans to achieve these goals, including the specific tasks and associated deliverables

• Current operating methodologies

• KPI results and targets

• Analytics and drivers behind each gap in performance (updated periodically)

• An organizational chart that identifies key gaps

• A unit calendar that helps everyone understand the key meetings and the overall approach to managing the unit

• Ongoing lists of issues and a list of possible goals for the following quarter

• Required resources, if any, to achieve goals

• Anticipated impediments and plans to remove them

This information will help the unit during its weekly and monthly meetings and prove valuable as the unit head prepares for quarterly operating reviews.

SET AN AGENDA

The best operating reviews are separated into two sec-tions: one that catches everyone up on the unit and the current state of the markets, and another where the conversation is focused on the unit’s future direction.

The first part is retrospective in nature; the manager up-dates everyone on the progress since the last operating review, reflecting on what worked and what didn’t, and why.

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This part of the meeting serves as a forum to:

• Remind everyone of the unit’s longer-term goals and

the goals that were set for the prior quarter

• Compare results against goals from the prior quarter

• Review the successes and failures of initiatives from

the last operating review

• Analyze KPI results for the previous quarter against

short- and long-term targets

• Dive deeper into the KPIs that are off-target and dis-

cuss possible causes for the gaps

• Examine the organizational chart

• Review assessments and/or capability maturity of the

unit, including:

– The unit’s customer/market impact during the previous quarter

– Methodologies/processes used by the depart-ment, and the KPIs and targets for each

– People

– Organizing approaches

– Economic model KPIs and targets

• Discuss obstacles to improvement

• Describe the current issues and opportunities in the

department and the list of ideas for improving them

Some of the best companies spend very little or no time

on the retrospective portion of the operating review.

Instead, they regularly circulate the information in

ongoing performance reports and everyone is expected

to read and comment on them. In this case, the retro-

spective portion of the meeting can be very short and be

used to answer any questions the team has.

The second part of the meeting is prospective in nature;

participants help the operating manager determine the

best possible goals for the following quarter. This part of

the meeting serves as a forum to:

• Discuss the potential goals developed by the operat-

ing unit prior to the meeting

• Brainstorm a list of potential initiatives going forward

• Exchange a list of potential things to stop doing going

forward

• Prioritize (first cut with a rough cost/benefit) the goals

for further review at a later prioritization meeting

• Discuss the new resources that might be required to

meet the goals and the resources that will be freed

up through productivity improvements, as well as the

tasks that the unit will stop doing

• Examine possible impediments to success and

approaches to removing them

• Determine a rough prioritization of the unit’s most

important goals

During this part of the meeting, participants should

offer independent ideas to identify the complete set of

potential goals, debate the merits of each, and deter-

mine the short list of prioritized goals.

“Operating reviews are a crucial part of our management cadence because

they force us to focus strategically at least once a quarter, even if it is just for

an afternoon. The reality is, we often set strategic goals, and then as soon as

the planning meeting is over, we forget about them. With the rigor of a quarterly

operations review, not only are you forced to reflect on why you did or did not achieve those

goals, you have to do it in front of the rest of the management team and potentially even a

board member. It’s an amazing vehicle for focus and honesty.”

Pete Gombert, CEO, Balihoo

http://balihoo.com/


ASSIGN ROLES

There are three primary roles for both the preparation for and execution of an operating reviews practice (this eBook contains several attachments that help each of the people involved with the roles to initiate the practice):

THREE PREPARATION ROLES

1. The CEO is responsible for:

• Ensuring that the team is fully committed to the oper-ating reviews, that the unit has the right set of outside advisors, that the first set of KPIs for each operating unit has been established, and that dashboards to report on the KPIs have been established

• Reviewing and commenting on draft presentations

• Providing support for any necessary changes moving forward

• Helping the unit heads identify better approaches for assessing their units

• Helping to identify each unit’s strengths and weak-nesses

• Bringing new practices and people to the attention of the unit heads to help the units function better

• Offering possible goals and helping to prioritize the list of goals prior to the meetings

2. The CFO is responsible for:

• Ensuring that each operating unit understands its bud-get and has the resources it needs to meet its goals

• Educating unit heads about their unit’s economic models and long-term financial and operational goals; how their units fit into the company’s overall eco-nomic model; and how their units are measured

• Providing top-notch (and independent) objective financial and operating metrics to the unit

• Ensuring that the appropriate financial and opera-tional control systems are in place

3. The unit head is responsible for working with the CEO, CFO, and operating unit to develop the material for the operating review.

THREE EXECUTION ROLES

1. The unit head is responsible for leading the conversa-tion on his or her unit, including:

• Presenting the unit’s current state and proposed goals for the following quarter

• Absorbing the meeting participants’ points of view, and identifying the insights that will help the unit perform better in the future

• Facilitating a discussion around alternative goals and the overall prioritization of those goals

2. The meeting participants (CEO, CFO, other operating heads, the board of directors, and outside experts) are responsible for bringing a unique outside view to the management team, including:

• Asking penetrating questions

• Helping the unit heads identify better approaches for assessing their units and each unit’s strengths and weaknesses

• Bringing new practices and people to the attention of the operating unit heads to help the units function better

• Offering possible goals and helping to prioritize the list of goals

3. The meeting facilitator is responsible for setting the tone by nurturing dynamic, constructive debate. Any of a number of people can serve as facilitator, but ideally the facilitator is the only person playing that role, and is not a unit head or a meeting participant.

In addition, it’s helpful to assign someone to handle the typical administrative tasks associated with important meetings, including:

• Preparing and distributing meeting agendas

• Informing participants of the time, date, and location of the meetings

• Booking the rooms and arranging for the technology needed as well as refreshments

• Updating the people presenting and preparing infor-mation for the meeting

• Taking notes during the meetings

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• Following up with individuals regarding action items

that were agreed to at the meetings

• Following up with participants and gathering feed-

back and assessments on how to improve each oper-

ating review meeting going forward

• Preparing and distributing notes from the meetings

6. SCHEDULE THE REVIEWS INTO YOUR CALENDARS

A typical operating review will take one to three hours

of dedicated time depending on the preparation of the

material, the importance of the unit to the company’s

current long-term goals, and the number of issues in

the unit.

The first operating review meetings tend to be longer.

As the senior management team gains experience with

the rhythm, the preparation materials get better, and

the participants become more knowledgeable about

each unit, the meetings will tend to become shorter.

Well-run units with managers who are fully prepared

with the right material tend to have the shortest operat-

ing reviews, which last about one hour.

Operating reviews should be held at the beginning of

every quarter. A series of meetings (one for each unit)

can be scheduled over the course of one or more days,

preferably off-site.

Since many board members will participate in operating

reviews and the material from reviews will go into board

packages, it is helpful to schedule the operating reviews

directly before the company’s quarterly board meeting.

“Conducting quarterly business reviews is always a challenge

because expansion-stage companies are often understaffed and

overworked. The last thing one needs is another review. But this

type of thinking can be dangerous. The CEO needs to make sure

that these reviews are relevant and consistently done. Good reviews ensure that

your operating plans stay current.”

Michael Sharma, CEO, Exinda Networks

http://www1.exinda.com/

http://labs.openviewpartners.com/ebook/quarterly-operating-reviews/

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