Your New Year’s Resolution: Set useful corporate goals in 2024
a RApport Q&A
December 15, 2023
As we zoom toward the finish line in 2023, it’s time to start thinking about New Year’s Resolutions for 2024. And in this market environment, setting clear, effective corporate goals is probably at the top of everyone’s list. So we asked ten experienced biotech board members what they consider useful, not useful, and downright irrelevant in terms of corporate goals. How do you know if goals are effective? How important is it that they can actually be measured?
For example, does simply raising money count as a corporate goal if it’s essential to a company’s survival and therefore must be accomplished? Or might it be more useful to frame the goal as extending runway by 18 months and allowing for flexibility as to how that’s achieved, including cost-cutting, grants, and partnerships?
The following responses have been edited for clarity.
Jeff Cleland (President & CEO, Ashvattha Therapeutics): Corporate goals need to be within the control of the employees and company, so goals tied to specific data or outcomes from clinical trials are not appropriate. Teams should be motivated to execute and create value based on quality results (whether positive or negative) in a timely manner within a realistic budget. A company can leverage the "elephant slide" approach by linking value inflection points to opportunities to raise additional capital at higher valuations. Continuing to finance the company at valuations acceptable to shareholders is not a corporate goal, it’s a given and intrinsically linked to other value-creating objectives.
Adam Rosenberg (CEO, Aliada Therapeutics): Raising money is a tough corporate goal as it’s so hard to predict timing and size, especially for a private company. I’d prefer to see a goal like "Secure additional 1-2 years’ runway through financing and/or non-dilutive funding," which allows for downward plan adjustments if the market is telling you that your fundraising goals are unrealistic. Regarding less useful corporate goals, I personally have a hard time with so-called "culture" goals; they are almost impossible to quantify and attempts to do so typically feel contrived. In terms of more useful goals, I think very clear topline R&D goals (e.g. nominate a development candidate; file an IND; etc.) are critical across the organization. Things always change in a biotech, but aligning around high-value R&D goals ensures the team is pointing in the same direction and also prioritizing what’s most important versus focusing on other, lesser responsibilities.
Stephen Hoffman (former CEO Allos and Aerpio; ex-venture investor and experienced board member): While difficult and time consuming to do, I think corporate goal-setting should reflect a pay-for-performance compensation philosophy so that goals are defined that anticipate varying degrees of achievement. Goals for just doing one's job drive me nuts - hiring a CMO, driving corporate culture, managing to budget, completing a trial on time, etc. Instead, goals should be derived for things that visibly drive shareholder value. Goals should be as quantifiable as possible, and gradients for partial completion defined (e.g., target, stretch, overachieve). It's fine to have a goal for raising money, but that goal should be defined by share price. For BD deals, I feel similarly: raising money is great but really depends on what was given away to achieve it. Incentive compensation based on achieving corporate goals should be just that - incentive. When bonuses are paid for just doing one's job - managing to budget, for example - they become entitlements. I also recommend re-evaluating annual goals for incentive comp purposes around mid-year to adjust for any significant changes to the operating plan.
Jon Congleton (CEO, Mineralys Therapeutics): Everyone knows the SMART acronym for goals [specific, measurable, assignable, realistic, time-related] and we all tend to use it. But I think it is critical to distill corporate goals into key value-driving events for the organization and leave the less-critical goals to functional tracking. The goals I have always focused on have been clinical study milestones and any high-risk, interdependent activities such as CMC, clin pharm, tox, etc. As to whether raising money should count as a corporate goal, I believe it does. Raising money requires strategy, planning, execution, and collaboration and is inherently risky, but is critical to driving underlying corporate value. That critical of a project should be a goal and achievement should be rewarded.
Fred Mermelstein (CEO, Dynamic Cell Therapies): It's not simply corporate goals that are important, but the underlying objectives that drive the agreed-upon goals. Corporate goals and specific objectives that lead to achieving milestones enable the creation of efficient budgets and spending, optimizing investment. Raising money is a perpetual activity that is critical to the survival and success of a startup or emerging company; it's a given that without fuel in the tank, the vehicle doesn't move. Funding the company is a corporate objective that fulfills the goal of providing at least 16-24 months of operating capital, which is often sufficient to achieve milestones that enhance a company’s valuation and mitigate excess future dilution to early investors who take the most risk.
Laura Berner (COO, TRexBio): Specific and time-based goals, in particular for early development, are challenging to set as timelines often slip and priorities change. But as long as the board is flexible, I still think it is critical to be driving towards a deliverable. Equally important, goals help illustrate company direction, and can be a way to give all employees a link to overall success. I think the least helpful corporate goals are ones that are out of a team's control - deliverables from a partnership that must come from the partner, for example, or a mandate to find a collaboration (versus to do a market check on the viability or terms of a partnership). Most things that end up as goals are essential to a company's survival, so I feel having a cash runway goal (maybe not every year but in years where it matters) makes sense, though I would prefer to frame it as finding options to extend runway, whether by financing, cost-cutting, partnering, or the like.
Nick Glover (CEO, MycRx; ~20 years public & private CEO and experienced board member): Goals are aspirational and objectives are measurable. Goals should define the North Star of a project or program; objectives demonstrate progress towards that aspirational outcome. Objectives should always be subject to empirical measurement. Goals and objectives trickle down throughout the organization and provide day-to-day guidance & direction for operating teams; if written well they empower all employees with clarity on what is most important (and why) when faced with both routine and difficult choices. A 'raise money' objective is a powerless operating outcome for most of the team, who are unable to directly connect to making that happen; conversely, delivering high-quality data that facilitates the company’s chance of raising capital or achieving a strategic outcome is something everyone can connect to and align on.
Todd Harris (CEO, Tyra Biosciences): We have not yet created a corporate goal around raising money, but instead focus on key operational activities that are largely linked to our public guidance as a company. As a small company we continue to have everyone's compensation to be 100% tied to our collective corporate goals instead of personal variations to maintain strong alignment.
Bill Heiden (former CEO, AMAG Pharmaceuticals and experienced board member): I’ll start with the fact that corporate goals are much easier to define when a company is revenue (profit)-generating, as the majority of goals set in that case tend to be quantifiable. Most frustrating to corporate goals assessment are delays that occur totally outside of management’s control (e.g. unexplained delays by the FDA). I believe that raising money and staying within agreed spending limits are definitely reasonable items to include in annual corporate goals. Boards should also be open to considering achievements beyond goals set at the beginning of the year - for example, the consummation of a huge, value-enhancing corporate partnership, which may not have been on the original goal list.
Peter Kolchinsky (Managing Partner, RA Capital Management): Corporate goals need to be unifying of lots of smaller decisions and aligned with the core value proposition that the company has made to shareholders. For example, I would say that for most drug development companies running a key study, the overarching corporate goal is “complete the key study before needing to raise money again.” Odds are, when the company last raised money, that’s what it said it would do and why investors invested. After all, investors tend not to fund a company to get only halfway to a value inflection.
That breaks down into needing to enroll the trial by a certain date and ensuring that the cash runway is long enough to get to the other side of data. Those two components of the core value proposition could be broken out as separate goals, such as “Complete trial by year-end” and “Have cash runway at least 6 months past year-end.” But one could succeed at one goal and fail at the other and end up needing to raise before data, which means that the company failed to deliver on its core value proposition. Especially in unforgiving market conditions, an extra financing before data can be financially punishing for those shareholders who don’t have the cash to participate. As a professional investor, I’m not particularly sympathetic to that, but as a board member, I recognize that the board has to look out for all shareholders and guide the company to achieve goals that align with a company’s promises to them.
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