We all set goals as a central feature in our business planning. They declare direction, focus everyone on what's important, illustrate what success looks like, and allow us to keep score on our progress. Setting them is a bit of an art though, and can be tricky. Read on…
On the one hand, there's a pretty clear consensus about most features of what makes a well-articulated goal set. It should be:
- Aligned with your priorities — Goals must clearly indicate to your team what's important, now and over the planning horizon. Call out too many goals, and your folks will likely be confused as to where to focus. Go for the minimum number that define what success looks like at each level of the organization.
- Specific — The more precise the better. Don't be fuzzy.
- Time-bounded — Not just what's to be achieved, but when, exactly.
- Measureable — When it comes time to assess performance against a given goal, there should be no ambiguity: you made it, or you missed it.
So far, so good, right?
But what about how ambitious to be in setting the specifics? Do you go for the most aggressive goal that could possibly be achieved, lay-ups that just about can't be missed, or somewhere in between?
As in so many other aspects of judgement in business, there's no magic formula to apply, and no one right answer. You'll certainly want to consider many factors about your specific situation on the way to deciding, ranging from matters of pure fact (how much cash do I need to generate so as not to trip a loan covenant?) to ones related to human factors (will the team respond better now to being challenged to a Big, Hairy, Audacious Goal, or one they're confident in blowing by?). There's no universal right answer (that's why they pay you the big bucks), but…
…There is however, in my experience, a framework that defines the merits of setting goals closer to one end of the spectrum of aggressiveness vs. the other.
Stretch goals, those that lie at the outermost extreme of what's possible, are a powerful instrument to get your team to think outside of the box. I've often found that a goal such as "Cut costs by 10%" yields either cries of "it can't be done — we've already cut to the bone," or the most pedestrian of possible initiatives. Counter to intuition however, setting one that challenges, "cut costs by 80%," after a "you've got to be kidding" initial response, often leads to a breakthrough approach to the problem, one that in fact achieves even more than the "impossible" goal.
When Jerry Swartz, Symbol Technologies' founder, set a "pole star" goal (see here for more on that) of designing a high performance bar code scanner with a cost of goods of under $50, at a time when the current cost was more than five times that, our engineers initially thought he was crazy. But the challenge made clear that incremental tweaks to their design wouldn't do. A fundamentally different approach was required.
Some years later, not too many, those same engineers had in fact (far) surpassed Jerry's goal. As importantly, throughout the intervening period, we pushed the cost envelope further, faster and perhaps just a bit more creatively than our competition — a major factor in our ability to sieze and maintain leadership in our space.
So, if they're so potent, why wouldn't we always set stretch goals?
Because there's very important value over there, toward the other end of the aggressiveness spectrum too…
That value lies in what happens when we step back, after the fact, and ask ourselves, "Did we make it?"
A good friend, investor in Intelleflex, and sage venture capitalist, Bob Pavey of Morgenthaler Ventures, is fond of explaining that in his experience there are two kinds of company, those that "Make Plan" and those that don't. Companies that make plan, always seem to do so. Ones that fall short, do so all the time too. Bob's on to something very important in that observation.
All of us who enjoy sports have seen it. Winners win, and losers don't. Winning is a habit. So's losing. Why? Because at the base of it, winning is about sustained purposeful effort and overcoming adversity. That's hard. It takes commitment and belief.
If your team consistently falls short of its goals, implicitly that becomes the norm. In effect, it becomes OK to fail. The effort required to prevail will not be mustered up by your team, and you will lose, time and time again.
The opposite is also true. As the saying goes, nothing succeeds like success. When your team gets a taste of winning, they'll want more. They'll push themselves, and each other, harder and longer. They'll be more confident. They'll step up, even to stretch goals, with the belief that, "of course we can do that."
My advice: be a leader whose team "makes plan." Use stretch goals selectively so as to stretch your team to think creatively, but set goals that you and your team are 100% committed to achieve. Get in the habit of winning.
A graphical summary of these ideas can be found here.