A funny thing happens on January 4th. It’s the day traditionally when people decide the mammoth New Year goals they set with such high hopes well and truly suck.
They look in the mirror and see that despite FOUR DAYS of exercising and dieting they are still not marathon or beach-ready.
By January 5th, the new running shoes will have been pushed to the back of the wardrobe and the bathroom scales will have been shoved out of sight. A new bottle of Prosecco will have been put in the fridge alongside a monster bar of chocolate. And the New Year ‘New You’ goals will be quietly shelved for another year.
In business, goals tend to be longer-term and even more audacious, designed to really stretch and motivate employees. So it usually takes months rather than days for the insanity of the ‘stretch goals’ to become apparent to everyone except the person who set them.
Stretch goals are an ineffective management practice, says renowned behavioural psychologist Aubrey Daniels in his book, ‘Oops! 13 Management Practices That Waste Time and Money’. Stretch goals are met only 10% of the time, he says.
Failing to reach stretch goals can have a detrimental effect on employee morale, says Daniels. Performance declines when people repeatedly fail to reach stretch goals.
The consequences of setting and then missing stretch goals can be profound, agree management professors Sim B. Sitkin, C. Chet Miller and Kelly E. See, who have carried out extensive research on stretch goals.
“Our research suggests that though the use of stretch goals is quite common, successful use is not,” they write in the Harvard Business Review. “Failures can foster employee fear and helplessness, kill motivation, and ultimately damage performance.”
They say only successful companies should tackle stretch goals. If a company has just surpassed an important benchmark in the industry or in its own recent history, for example, it’s well positioned to tackle a stretch goal.
“Winning affects attitudes and behaviours positively. When confronting an extremely challenging task, the employees of recent winners are more likely to see an opportunity, systematically search for and process information, exhibit optimism, and demonstrate strategic flexibility.”
Companies that are experiencing weak results should steer clear of stretch goals, they say. “Their employees are more likely to see a stretch goal as a threat, grasp for externally sourced quick fixes, exhibit fear or defensiveness, and launch new initiatives in a chaotic and ultimately self-defeating fashion.
Daniels says despite his findings, it’s difficult to convince executives about the danger of using stretch goals.
“I get more push-back from executives about stretch goals being a waste of time and money than any other thing I’ve written. Executives believe stretch goals will motivate people to do more than they would have if they didn’t set goals. It’s not true.”
So, if stretch goals rarely work, what can you use in their place?
How to Set Productive Business Goals
Setting realistic goals that motivate employees to do more is more successful than stretch goals, says Daniels.
The key to setting such goals is to:
- Keep it simple. Focus on one or two things at a time. “Trying to accomplish too many things at once prevents you from being able to do any one of them well,” says Daniels.
- Define clear actionable behaviours. Decide what needs to be done to accomplish the goal. Break down the steps into concise actions that need to be taken.
- Set many mini goals. To boost the likelihood of success, break the big goals into smaller, more achievable ones. “Positive reinforcement accelerates performance and therefore, the more reinforcement opportunities available, the faster and greater the improvement.”
- Forget stretch goals. If the goal is too high or too difficult to achieve, people will get discouraged and give up.
- Celebrate! Every time that a milestone or goal is reached, reward and recognise your employees. “Recognising even incremental progress towards a goal provides more frequent opportunities for reinforcement,” says Daniels. “The more reinforcement, the greater the likelihood the desired behaviour will be repeated, and the more likely achievement of long-term goals will be made.
“Making accomplishments visible and sharing them publicly—when appropriate–creates more reinforcement from peers, groups, and management teams who recognise and acknowledge your success.”
Set SMART goals
Make sure the goals are small, measurable, achievable, relevant and timely.
How to set goals for your business
Before embarking on any goal setting activity for your business, you need to know the current state of your business. Fortunately, the CFO Centre offers free financial health checks. You can find out more here or call us at +64 (0)9 376 4940
 ‘The Stretch Goal Paradox’, Sitkin, Sim B., Miller, C. Chet, See, Kelly E, Harvard Business Review, January-February 2017, www.hbr.org