“We are not advocating stagnation or risk aversion; to the contrary, we understand that the next Panama Canal, moon landing, and iPhone cannot be produced without bold ambitions. But attempts at such outcomes should not be ill-advised lottery bets.”
Named CEO of Yahoo in July 2012, Marissa Mayer bullishly announced that she had set her sights on bringing “an iconic company back to greatness”. The business fraternity and media couldn’t get enough of her assessment of the ailing organization and her vision of achieving double digit annual growth in five years, besides taking on eight additional challenging targets. While Yahoo’s annual revenues had already dropped from $7.2 billion to $4.9 billion in the previous four years, things didn’t move much after Mayer’s ascension to power. While she had promised the moon, in reality revenues remained flat and six of the eight targets fell way short.
Jim Collins and Jerry Porras’s 1990s bestseller Built to Last extolled the virtue of setting “big, hairy, audacious goals”. Such goals, the kind Mayer talked off when she took charge, are what we call stretch goals that often serve as drivers of individual accomplishment and organizational feat. Google’s X unit band is clearly guided by this philosophy: “More often than not, (daring) goals can tend to attract the best people and create the most exciting work environments … stretch goals are the building blocks for remarkable achievements in the long term.” However, dreaming to transform an organization by achieving seemingly unattainable goals is one thing, doing so with current practices, skills and knowledge levels is quite another. Ironically, organizations that are well-suited to pushing higher seldom exert themselves, and those that are better-suited to deploying simpler strategies foolhardily do so. This is termed as the ‘stretch goal paradox’.
True stretch goals essentially differ from ordinary challenging ones in two important respects. Stretch goals set radical expectations that transcend existing capabilities and performance. Southwest Airlines, for instance, set itself the stretch goal of achieving 10-minute turnaround at airport gates. A drastic departure from the industry standard of one hour, this familiar task had to be accomplished in an altogether new way. Southwest completely overhauled its practices and re- engaged its customers. In other words, new approaches and processes are required. Working differently is essential, not simply working harder. However, it is also important to remember that the fallout of missed stretch goals can generate insecurity, apprehension, and helplessness among employees, thereby affecting performance.
Primarily the following two factors determine success at meeting stretch goals.
Recent performance: The effect of recent performance is seen practically everywhere – from sports to business. An organization that has recently crossed an important milestone or made a remarkable feat is well positioned to take on a stretch goal. Winning boosts workforce behaviours, and therefore employees are more likely to see and respond proactively to bold operations. A company that has underperformed and displayed weak results has its employees perceiving stretch initiatives as further threat, approaching the new initiative with both apprehension and dejection.
Slack resources: Availability of resources is critical to an organization that is poised for stretch initiatives. Well-resourced firms with funds, people, knowledge and skills in excess can not only take on new challenges that may run as parallel initiatives, but are better equipped with “emotional reservoirs that increase their resilience” and withstand setbacks.
When stretch goals should be avoided: Paradoxically, organizations better off without setting themselves stretch goals, lacking resources or recent wins, end up pursuing them. Daniel Kahneman and Amos Tversky’s Nobel-winning research demonstrates how failures put decision- makers in a risk-seeking frame of mind.
When stretch goals should be pursued: Organizations that boast of recent successes and resources to spare are best poised for stretch goals, yet they hesitate so as not to disrupt their success spell. Pursuing stretch goals at a time when an organization is at its peak may actually be the best way to stay on top. An effective means of doing so is “to frame the situation in terms of potential losses, emphasizing what could happen if the organization stands still while others are on the move. That works because people feel losses much more intensely than gains.”
By and large, organizations that are not very successful or strapped tend to fall in two categories: confident but constrained or discouraged but capable. Both are advised to take small steady steps. By its very nature, stretch goals and the novel routes that must be taken to the destination are fraught with uncertainty. So, pursuing small wins work. At the end of the day, an organization must make a dramatic leap only after a deep and more nuanced understanding of the timing and viability. It isn’t unknown that stretching an object beyond a point may only cause it to snap!
