Your "Stretch" Goals Are Probably Magical Thinking
When you ask your team to stretch, you're probably asking for the impossible
A lot of companies like to set “stretch” goals alongside their actual goals.
Actual goals are the ones you need to hit to make the numbers you’ve promised investors and to keep the business alive. Stretch goals are the goals you really wish you could hit that would truly be an amazing, above and beyond accomplishment.
Stretch goals seem like a great idea on the surface. The thinking is that you can set these goals beyond your “normal” goals and if you hit them you’ve done something amazing, but if not, no harm done. You might “fail” to hit that stretch target and still reach your actual goals. The problem with this thinking is that it’s not this simple. Stretch goals (especially unmet ones) can actually cause more harm than good if you don’t treat them correctly.
One of the main ways I see stretch goals failing as an effective tool is in the setting of the actual target. The easy (i.e., lazy) way to set a stretch target is to just take your actual goal and just add some fixed percentage on top of that. If the goal is $1 million, then just add 20% and the stretch goal is $1.2 million. As usual, taking the easy way often doesn’t work. The part that companies miss here is checking the goal against what’s actually possible. I’m not talking about possible as in: “it would be really hard, but it could be done if everything lands just right.” I’m talking literally impossible. There are a few ways a target could be impossible. Maybe your actual goal uses up all of your production capacity. Selling beyond this isn’t going to do you very much good. Maybe the market size required for your stretch goal doesn’t exist. You need to reach X number of car dealers (or whatever) to hit the stretch, but there are only X minus 1000 car dealers. Check your math before you send your team out on an impossible mission.
Another way stretch goals can do more harm than good is if you don’t actually treat them as above and beyond. This is often a very subtle messaging issue from the leadership team. If you are always talking about your progress towards stretch goals and not your actual targets, you’ll likely find that you’re constantly telling the team they are behind (i.e., not doing well enough) when in fact, they are right on target. This is an easy way to kill morale and create the unintended consequence of not only missing your stretch goal, but also your actual targets.
If your stretch goals are really a stretch and it will require your team to go above and beyond (more on this in a second), you need to ensure that you’re rewarding them as such. This is another place where stretch goals don’t work if done incorrectly. If you’re not providing big incentives for hitting this goal, then you can forget about it before starting. Similar to my last reason, this can be a morale killer with unintended consequences. My view here is that your incentives need to be somewhat outrageous to make these types of goals work. That is, they need to be a legitimate increment over and above what simply hitting 20% over target might pay out (assuming you used 20% over your normal goals as your stretch target). You should provide an additional incentive for getting to this number. In my 20% example, if a team’s payout for 100% is $10k, and 120% payout is normally $12k, it needs to be more like $15-20k. If it’s not a big jump when you hit the stretch, people will not work towards it. You need to put money against the fact that this is an above and beyond target and the incentives are also above and beyond.
Those are a few big reasons why stretch goals don’t work, but the main reason they don’t work is really simple. In order to hit stretch goals, you need to let your team stretch. It means you need to encourage them to do things they wouldn’t normally do. Stretch goals aren’t achieved by working extra hours or “trying harder.” People are doing that already. Stretch goals should be very hard (but not impossible) such that doing a bit more of the same things isn’t going to get you to that target. These goals should require completely different ways of thinking. New strategies and new tactics are required. You can’t get there by, say, increasing marketing spend by 20%, but doing the same marketing tactics. But you also need to give your team permission to come up with and execute these new ways of thinking.
Many companies are not set up to do this kind of thinking. They are command and control structures where coloring outside the lines isn’t permitted much less encouraged. If you are one of these companies, please don’t bother with stretch goals. It will be a waste of time that will only frustrate people.
I’ve been fortunate enough to lead teams at two different companies that have hit their stretch targets and in each case, we were allowed to do things completely differently. Credit to my leaders at AstraZeneca (then a top 5 pharma company) for trusting me (someone brand new to the team…and marketing in general) to literally tear up all the strategy documents, messaging, instructions to the sales team, and literally every bit of collateral (at great expense). It worked…all the warnings I spelled out above were heeded and the team took a drug that was losing 2% per year for the past 3 years to growing 12% (and 20% the year after that). We reached the “Breakthrough Goal” by a handful of thousands on a target of around 9 digits. It literally came down to the last day of the year. I recall promising the sales team that I’d eat my shoe if we didn’t hit the stretch target at our first sales meeting. I received many emails with pictures of various shoes throughout the year, but managed to avoid figuring out how to make good on this promise.
One great side effect of this accomplishment was that the team knew what was possible and continued with this innovative thinking for years afterwards even without a formal stretch goal target. It became business as usual to think differently and go above and beyond. This is what makes stretch goals hugely powerful, but they can have the opposite impact if not implemented and executed carefully.
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