Wells Fargo & Co. fired four senior executives this week - part of the continuing fall-out from their sales-practices scandal (see The Wall Street Journal, February 22, 2017). The WSJ article describes “lofty goals that led some staff to engage in improper behavior.”
But wait. Aren't lofty, bold, stretch goals supposed to be motivational? While the Wells Fargo case may be an extreme example, it might surprise managers to learn that so-called stretch goals commonly produce poor outcomes. Stretch goals not only fail to drive superior performance but they have unintended consequences managers should be on guard for.
Dr. Aubrey C. Daniels is one of the world’s foremost authorities on applying scientifically-proven laws of human behavior to the workplace. His academic research and many years of consulting experience has led him to this conclusion:
“Stretch goals are an ineffective management practice and, as such, waste time and money.”
In his book “Oops, 13 Management Practices that Waste Time and Money” he concludes:
“Stretch goals are based on the faulty assumption that you have to pull performance out of people and, without repeated challenges, people will settle for something less that they are capable of doing.”
What is a stretch goal?
It’s an imprecise term but roughly we’re talking about goals that far exceed what’s likely or possible. Dr. Daniels says stretch goals are operationally defined as those that are attained less than 10 percent of the time. And he notes, “why would a manager set a goal that employees will fail to reach 90 percent of the time? One answers, of course, is that they mistakenly believe that doing so will motivate employees to achieve more than they would by only setting reasonable goals. It doesn’t. What most managers fail to understand is that people are motivated only when they have received positive reinforcement for reaching their goals in the past.”
Daniels says one reason stretch goals are used is that “they are consistent with popular corporate culture that believes great managers are hardnosed and demanding. Their teams are expected to reach for impossible goals or else.”
Sign of misunderstanding: “If you meet all of your goals I must not have set them high enough?”
Have you ever heard a manager say, “If you meet all of your goals I must not have set them high enough?” The research says that this is exactly backwards. According to Daniels, “Contrary to popular opinion, the best mistake in setting a goal is to set it too low. By setting it low you increase the probability of success. By rewarding goal attainment, you increase the motivation and achieve subsequent goals.”
Dr. Daniels also suggests that instead of stretch goals, managers should set up more attainable mini-goals. Why? Build the experience of attaining goals.
In the current issue of the Harvard Business Review (Jan-Feb 2017) authors Sitkin, Miller and See, suggest a similar approach. They recommend more modest mini-goals instead of the “ill-advised lottery bets.”
Their article “The Stretch Goal Paradox: Audacious targets are widely misunderstood - and misused” points out another issue with stretch goals. Unfortunately the motivation for using them is borne out of deperation. The organizations least equipped to use stretch goals are the ones most likely to try them. Why? They need a “Hail Mary” goal to overcome recent failures.
Neither Dr. Daniels nor these authors are against bold targets. The question is more about how to go about reaching them. Both suggest more measured approach of smaller determined steps of mini-goals.
Paradoxically stretch goals can put a limit on what’s possible. They can set a perceived ceiling. By pre-determining success, people sometimes become satisfied when they reach the level of management expectation, also known as the “safety plateau.”
Dr. Daniels suggests a way to make goals work for you.
- Set many mini-goals. Allow the goals to be attainable without Herculean effort. Daniels says in his book, “This is because positive reinforcement accelerates performance and small goals provide more opportunities for acceleration.”
- Display the progress visibly in graphic forms – and with frequency. Think: dashboards. Daily if possible, weekly when daily isn’t workable.
- Plan positive and frequent feedback. By plan, we mean the conversation needs to be scheduled, not something you do casually when you think to. (The process we utilize in our execution accountability system, ensures a monthly progress meeting on goals).