In the recent British elections, one could perhaps justly describe the Labour Party manifesto as being full of stretch goals. Stretch goals have become quite popular in business circles as they encourage leaders to look beyond the standard towards what might be regarded as moon shots. If they’re not highly ambitious, they’re not good enough. The feeling is that such goals encourage innovation and unify resources behind a challenging, yet highly motivational goal.
Whilst sometimes that may well happen, a recent study suggests that such oversized performances are the exception rather than the norm, with most stretch goals actually reducing performance levels rather than supercharging them.
Stretched to the limit
The researchers examined the impact of assigning stretch goals to managers vs more attainable goals. It emerged that 80% of participants failed to achieve their stretch goals. Whilst one or two people managed to improve their performance levels, the vast majority abandoned the goals in favor of lower self-set goals. As such, the assignment of stretch goals resulted in huge variance in performance and significant shortfalls that often resulted in higher risk taking.
“We find that stretch goals are not a rule for riches for all organizations. Instead, they lead to riches for a few organizations,” the authors say. “Instead of being evidence that organizations should adopt stretch goals, the small number of successful cases is evidence that stretch goals do not benefit most organizations. Many organizations do not benefit and may even suffer from adopting stretch goals.”
Whilst the opinions of the authors towards stretch goals are not especially high, they do nonetheless leave the matter of whether to try them to managers themselves. They suggest their attitude towards risk will likely inform their decision, with those with large appetites for risk being more disposed towards using them. For instance, in the venture capital world, the pay-off from a big winner can easily trump the losses or limp returns from the rest of the portfolio.
If you’re less comfortable with risk however, either as individuals or as an organization, then stretch goals may have a negative impact, especially if you’re the kind of organization that would struggle to recover from any potential losses that may emerge.
Built to last
Of course, it’s advice that goes against the grain, not least of Jim Collins, who famously lauded the pursuit of big, hairy goals in his best seller Built to Last.
Alas, this study joins various others that question the validity of such a statement. Indeed, it’s surprisingly common for organizations that could benefit from stretch goals to not use them, and those who could be significantly harmed by them going ahead regardless. It means that neither approach is likely to deliver good results.
There appear to be a couple of factors that help to determine whether a stretch goal could be valuable (aside from your attitude to risk):
- Are you starting from a good base? If you’ve recently achieved success, then that gives employees the confidence and platform to build upon and aim higher.
- Do you have some slack? Any innovation requires resources, whether it’s time, energy, money or expertise, but it goes without saying that the bigger the challenge the more resources are required. If you’re already stretched thinly, then your chances of success are minimal. What’s more, such well-resourced organizations are also able to cope with any failures that may result.
Alas, it’s often not organizations meeting these criteria that aim for stretch goals. Instead it’s those that have a recent failure in mind who go for one last roll of the dice and hope that fortune favors the bold.
Given the number of high profile success stories of companies reaching for the moon (and making it), the very notion of stretch goals is a well trodden one in the business narrative. As such, it’s no surprise that managers become tempted by them.
Whilst there’s nothing ostensibly wrong with such lofty goals, hopefully this study will remind managers of the propensity for stretch goals to fail, and to do their best to ensure they provide their goals with the right kind of environment to have the best chance.
