March 2012 Newsletter — The Folly of “Stretch Goals”

“Stretch goals” are worse than useless; they actually can demotivate workers and encourage unethical behavior. The solution is to establish a “target condition,” and focus on improving the processes that will get you there.

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5 thoughts on “March 2012 Newsletter — The Folly of “Stretch Goals”

  1. Hi Dan

    What’s your definition of a stretch goal? Isn’t a stretch goal is just something that requires achieving a higher level of performance?

    “End world hunger” is not a stretch goal any manager would set, it is a dream, or a long-term vision at best.

    How are stretch goals different from “pursuit of perfection” or “striving towards the ideal” in lean / kata terms?

    Stretch goals are fine, but gaming the system, sandbagging, achieving the stretch goals through heroic effort, etc. are bad because this is not sustainable.

    In terms of excessive risk taking, this is a question of the risk-reward calculus and the person’s degree of risk aversion. It doesn’t take a stretch goal to make Enron leaders cheat when their auditors are turning a blind eye. They stole because they could, not because a leader set stretch goals for them. If the governance around the goals are solid and the downside of risk are significant, people will pursue stretch goals in a way that is not destructive.

    Achieving stretch goals, setting a new standard, a higher level of performance, are great things. We can do this by accident or by setting and striving towards goals that stretch us to find ways to move beyond our current limitations.

  2. Jon —

    Thanks for the thoughtful comment. For me, there’s a significant difference between “stretch goals” and the “pursuit of perfection.”

    The former generally has a short time frame (within a year, say); has an incentive associated with it (usually a financial bonus); and is tied to a trailing indicator (revenue or profit).

    The latter is not always reachable, but it can serve as a guiding star for the group; it is longer term; doesn’t carry a reward; and is, to use Rother’s words, a “condition,” or a state of being.

    Are stretch goals inherently evil? No — but as long as the attributes that I describe above obtain, they will create incentives to cheat, sandbag, commit unethical behavior. So they’re risky.

    You also say that “It doesn’t take a stretch goal to make Enron leaders cheat when their auditors are turning a blind eye. They stole because they could.” I have to disagree. You’re implying that people will cheat when they can, and that it’s only external controls (accountants, police, etc.) that keep them in line. But I believe that most people, most of the time, will do the right thing. I don’t know you that well (except through your writing!), but I’m pretty sure that you wouldn’t steal, cheat, or lie to your company or your clients irrespective of how tight the controls are at the Kaizen Institute. However, if you had the opportunity to make a HUGE bonus — millions or tens of millions of dollars — for achieving certain stretch sales targets in China, for example, you might be sorely tempted to act differently. I’m not saying that you would cheat; but the temptation would be there.

    Your argument is challenging and thought-provoking. I’ve really had to revisit my thinking because of your comment. But I’ll stand by what I wrote.

  3. Hi Dan

    Delving into the scientific literature on behavior related to whether people will cheat when they can would be interesting. Is it cheating when you simply can’t resist an urge to break a rule, to self-regulate? If so, the children who eat the marshmallow that is forbidden rather than wait 15 minutes for 2 are born cheaters.

    But my point was that cheating is not caused by stretch goals, it is caused by poor governance around the performance and rewards process. Even if only 10% of people cheat, if there is poor governance, the fox is in the hen house. It only takes one fox to clear out the hen house. Pareto’s law probably holds and a small percentage of people cheat and gain the most plunder, do the most harm.

    The more interesting question is why leaders continue to set up such systems. Are they stupid? Evil? Or do such systems produce results?

    Thanks for clarifying what you meant by stretch goals. I think we agree that there is nothing inherently flawed with the stretch goals as such, it’s the systems around them and how you use them, as I will continue to do.

  4. Jon — I wonder if it comes down to the old adage that no one ever gets fired for buying IBM (or hiring McKinsey, or using FedEx, etc.). Stretch goals have the appearance of being a component of solid management tactics.

    Of course, so does batch and queue processing. . . .

  5. Pingback: Respect for People, Shingo Edition |

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