One of the ongoing controversies of the business world boils down to this: Should you (and your employees) set big, challenging "stretch goals" or should you keep your objectives realistic?
Depends who you ask.
On one hand, the champions of SMART goals encourage us to set targets we feel confident we can reach: A is for "attainable," R for "realistic."
On the other hand, some experts, most prominently in the startup sector, praise stretch goals. Like Steve Jobs's "reality distortion field," the idea is to use seemingly unachievable goals to open new possibilities and unlock people's full potential.
As seductive as that idea is, I believe leaders should be cautious of a blanket endorsement of stretch goals, especially when we're talking about short-term goals in medium-to-large organizations. After 20-plus years of CEO-ship, I believe that many of us underestimate the harm these overly difficult goals can cause.
This is not a new case to make. In a piece for Harvard Business Review, Daniel Markovitz outlines three reasons stretch goals don't work as advertised:
- They can demotivate people greatly. Missing goals feels bad, plain and simple, and stretch goals are often missed. Markovitz points to the "small wins" approach as a better and more motivating alternative.
- They can encourage unethical behavior. By emphasizing the end state rather than the process that gets you there, stretch goals may encourage employees to take shortcuts.
- They can lead to excessive risk-taking. Similar to #2, big goals can provoke big gambles, without the required forethought.
I think Markovitz is right, but I would also point to a larger, more holistic problem caused by overuse of stretch goals: unpredictability. I've seen this develop in organizations that don't consider whether company, team, and individual goals are realistically achievable.
With all that cash lying around, companies like Google can afford to pursue big moonshot projects. They can be fine with only getting 60-70 percent of the way on most goals they set, as the otherwise laudable OKR methodology recommends. They can handle that unpredictability of achievement. Most of us running companies today don't have the luxury.
It's all about predictability
Especially if you're a CEO, predictability is your Holy Grail. You tell the board (and, for a public company, shareholders) what results you expect to deliver, and if you don't make those forecasts accurately enough, you lose credibility and maybe get yanked.
The best CEOs and leaders make achievable short-term commitments and build the organizational capacity to meet them consistently. Computer scientist Ian Clarke describes it this way: "Predictability means accurately estimating what will get done and by when, and communicating that with the rest of the company." That process of committing and delivering is the cornerstone of sustained performance.
Imagine what happens, conversely, when the CEO of a medium-to-large company sets multiple unrealistic goals for the organization in a given quarter.
First of all, the company won't take them seriously.
Second, the CEO won't be able to get a clear sense of whether the goals will be achieved. They weren't likely to be completed in the first place, so how can she get a realistic update?
Finally, when the goals aren't achieved, no one is surprised, no one is held accountable, and no real lessons are learned about what could've been done to change the outcome.
Be the tortoise
For this reason, I think CEOs are better off striving to be the tortoise rather than the hare as they set quarterly objectives for the company. Set targets that are ambitious--research shows that challenging goals do inspire high performance--but that you and the team truly believe you can achieve. Then, strive to help your team hit them like clockwork, in a steady march rather than a series of spurts.
When you have this constant, predictable forward motion, you'll find that the stretch goal you set way out in the distance, ten or twenty years in the future (your BHAG), will itself become more achievable.
Know when to stretch
Of course, stretch goals have their applications, especially during the startup phase, where the team is small, easy to communicate with, and driven by a sense of urgency. But once the company grows past a certain point, predictability becomes the imperative for the CEO.
In certain circumstances (if the company is in crisis or is chasing a critical opportunity, for example) it may be useful to set a single goal past the limits of achievability to inspire higher performance and new ways of thinking.
But if it becomes part of your culture for people and teams to set multiple, difficult goals and not be held accountable when they are missed because, hey, they were really ambitious anyway, you may end up like the hare, overtaken by competitors who prioritized steady, predictable achievement.