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What are stretch goals?

Imagine if your boss has a good idea: Since the budget targets do not seem ambitious enough to him, he decides to make them a little more visionary. 25% are quickly added to the sales target so that the round 10 million is finally reached. To the horrified objection of the employees, the answer comes that only big targets lead to big results and after all there is a big bonus if the goal is achieved. Is that good management or excessive ambition?

 

Stretch goals are a term that was used in 1999 by Jack Welch, CEO of General Electric, was coined. He used it for goals that were derived from dreams and so demanding that no one could imagine how they would be achieved. Specifically, stretch goals are characterized by two properties: They are extremely demanding and therefore difficult to meet. Second, this means that they can only be achieved with novel methods and approaches. A good example of this is Googlethat his stretch goals X goals and wants to express that they intend to improve the current situation tenfold. Anyone who wants to be ten times as good as before can no longer think in terms of existing structures, but has to Find completely new ways. In this sense, the introductory example is not a stretch goal, it does not go far enough.

Stretch goals are used relatively often, but mostly incorrectly, which then leads to a number of disadvantageous effects. At first, failing to achieve your goals can be extremely demotivating. This is reinforced by the fact that stretch goals are in most cases chosen in such a way that there is a high probability that they cannot be achieved. If stretch goals are chosen incorrectly, it can also be strong negative consequences for acceptance of management. The accusation that management has lost touch with reality can quickly arise.

The right remedy?

If too much pressure is built up, stretch goals will seduce you too excessive risk. Ultimately, it is required to break the existing business model; this is not possible without risk. Coupled with a mistrust of management, that too can be too Defiant reactions and the Rejection of responsibility with the meaning of "I've always said that the goals are unrealistic, but if you really want to, you have to face the consequences." to lead. In the worst case, this culture leads to unethical behavior from false customer promises to balance sheet fraud (such as in Enron showed).

Stretch goals are therefore only the right means in certain situations, but should then be used consistently. Interestingly, it is mainly companies that use stretch goals that should be more cautious and those that need stretch goals abandon them. That is also called that "Stretch Goal Paradox" described.

Stretch goals are a good idea if the company meets two requirements: There has to be one History of success and the team has to be used to the fact that effort leads to success. Contrary to the opinion that stretch goals are a way out of the valley of failure, on the contrary, they are especially useful when successful teams are to take the next performance step. Second, the company must available resources that can be used to achieve the goal. Available does not mean that employees are boring, but that they are misused. Abolishing and focusing can free up resources. If resources are not available, stretch goals lead to frustration.

If these two requirements are not met, stretch goals are not recommended. If the company is successful but slow, then stretch goals are the right way to leverage the full potential of the organization.

It all depends on the formulation

Stretch goals have to be formulated correctly. What applies to all goals is especially true for stretch goals. In addition to the classic SMART criteria, stretch goals should meet three conditions:

Stretch goals are no financial goals. These are the consequence of something else, that is "Lagging indicators". Stretch goals are as "Leading indicators" to design. Innovations, process improvements, quality, etc. should be the subject of stretch goals, but never sales or earnings. These follow from the achievement of correctly chosen stretch goals. Tesla is known, for example, for formulating almost unattainable technical goals. Although these are usually not achieved, they give the company and competitors motivating pressure and perspective.

Stretch goals are based on external factors, not the company's historical results. Stretch goals are set in relation to the customer, the state of the art or the competitor and not measured against the circumstances of the company. In this sense, too, the example given at the beginning is bad management and not a stretch goal.

Stretch goals need one Error-friendly culture. Anyone who believes that not achieving a stretch goal leads to termination will not be able to work freely and creatively on achieving it. Some believe that getting rewarded for going the wrong way is also an option. It should simply be fun to get the best out of the company.

Keywords:Business administration, management