The concept of "stretch goals" have been in the management vocabulary,

under various names, for some time. However, in the early 1990s, Jack
Welch and General Electric became avid promoters of the concept. By
definition, stretch goals are goals that one does not know how to reach. By
specifying the "unattainable", people are required to "think outside the box",
and able to improve performance by a magnitude they had never thought
possible.

The risk of "stretch goals" for financial advisors is that the goal is initially
set in a wild burst of enthusiasm, and not reached...causing the advisor to feel
like a failure. In fact, I suspect that many salespeople have lived for years with
"achievement failure"...constantly setting goals that are not realistic. This
failure can become a habit...or acceptable.

For most all of us, reaching a goal is tremendously psychically rewarding and
provides important psychological nourishment and reinforcement.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

STRETCH GOALS: THE DARK SIDE OF ASKING

FOR MIRACLES
STRAT SHERMAN; STEVE KERR

Steve Kerr is the "chief learning officer" of General Electric, a company known for its
executive development programs. An expert in reward and measurement systems, Kerr
has long focused on matching incentives to goals, a practice at which many corporations
are surprisingly inept. Before moving to GE, he capped a long academic career as the
dean of faculty at the University of Southern California's business school and consulted
for companies such as Citicorp. At GE he has played a key role in designing the famous
Work-Out program, which trains GE employees to prune bureaucracy and to think about
work in new ways. He met with FORTUNE's Strat Sherman at GE's Crotonville school.
GE has been touting stretch targets for years, yet you say they can be destructive. What
gives?

Most organizations don't have a clue about how to manage stretch goals. It's popular
today for companies to ask their people to double sales or increase speed to market
threefold. But then they don't provide their people with the knowledge, tools, and means
to meet such ambitious goals. We all agree that generally you get more output by
committing more input, but now corporate America seems to be trying to get more output
just by demanding more output. Ask them to explain the incongruity, and they say,
"We're smarter now. We're not going to give you more people, or money, or physical
space; we're not going to give you more of any resource, so your solution is going to have
to be to work smarter, get out of the box, and be creative."

So what happens?

To meet stretch targets, people use the only resource that's not constrained, which is their
personal time. I think that's immoral. People are under tremendous stress. And that's what
I'm seeing all around this country, people working evenings, working Saturdays, working
Sundays to achieve these stretch targets. Americans, in fact, now work longer days with
fewer vacations than people in almost any other developed country.

Therefore we have a moral obligation to try to give people the tools to meet tough goals. I
think it's totally wrong if you don't give employees the tools to succeed, then punish them
when they fail.

Why bother with stretch targets in the first place if they're going to harm workers?

Well, if done right, a stretch target, which basically is an extremely ambitious goal, gets
your people to perform in ways they never imagined possible. It's a goal that, by
definition, you don't know how to reach. You might, for instance, ask people to cut costs
by half or reduce product-development time from years to months. Stretch targets are an
artificial stimulant for finding ways to work more efficiently. They force you to think
"out of the box."

There's plenty of evidence that if you don't find dramatically new ways of doing business,
you're not going to be in business. And if you don't intrude artificially into what's going
on, you probably won't come up with radical, out-of-the-box ideas. So clearly some
intervention is needed.

What's the right approach?

No. 1, don't set goals that stress people crazily. No. 2, if you do set goals that stretch them
or stress them crazily, don't punish failure. No. 3, if you're going to ask them to do what
they have never done, give them whatever tools and help you can.
Most employees already feel overworked today. How do you persuade them to accept
such ambitious goals?

When you first start out, I think you have to give people confidence, because the first
reaction always is "You've got to be kidding." Generally speaking, I think it's necessary
that the stretch target be seen as achievable. But you're walking a thin line. Because if
you already know how to get there, it's not a stretch target. And if you set a goal that's
way out of line, you become an object of ridicule or fear. You can offer people any
amount of money to fly around the room, but they still won't be able to do it.

It's not the number per se, especially because it's a made-up number. It's rather the
process you're trying to stimulate.You're trying to get people to think of fundamentally
better ways of performing their work, to cut out unnecessary work.

So in a way, you need to sell people on the notion that we use only a small percentage of
our creative energy, that we have an infinite capacity to speed things up or an infinite
capacity to improve things. Once you do that, you don't need to waste time justifying
every stretch target by proving that someone else, either in the company or elsewhere, has
proven it can be done.

The late Norman Maier, a psychology professor at the University of Michigan, did some
great research on problem solving. His conclusion was that groups stop too soon. He
would give people targets, and they would bring him a solution, and he would say, I don't
accept this solution. And invariably, the next solution they brought was markedly better
than the first.

There's a story about Henry Kissinger. Apparently he asked for a report on some country,
his assistants handed it in, and he wrote in the margin: "Is this the best you can do?" So
they panicked. They went and did it over. And again, he wrote something similar in the
margin. The third time, he wrote another note, and they responded, "Yes, this is the best
we can do." Kissinger then said, "Now I'll read it." I think he should have read the earlier
drafts, but you get the point.

But you can't really just pull a goal out of thin air. No, of course not. You've got to find a
middle ground. If you set easy goals, people may meet them but probably won't exceed
them by very much. If you set extremely hard goals, people lose faith in them.

Also, in this interdependent world of ours, you have to realize that when you set a stretch
goal, it has implications for somebody else. Say I set a stretch goal for sales. You have
been selling ten widgets a day, and now I want you to double it to 20. But you can't sell
those extra widgets if manufacturing doesn't make them. So once we set that stretch goal,
how many widgets should manufacturing build? If you don't make your numbers, you
end up with that dreaded thing called inventory. It's hard not to get grouchy when
manufacturing built stuff that didn't sell. That's a tough thing not to punish.
What's the solution? In this example, manufacturing and sales are going to have to
communicate much more closely and adjust output as the year goes on.

Should everyone be given the same stretch goals?

No, not at all. The danger is that you can end up hurting your best people. A golden rule
of every work system is: Don't hurt the high performers. The folks in your best-
performing business units may already be stretching themselves to the limit.

What repercussions are there?

One issue is self-punishment. If you're truly setting stretch goals, by definition you can't
have a high degree of success. For individuals who are high achievers, it's not their style
to miss goals. So you end up making people who are winners feel as if they're losers.

So how do you keep people from burning out?

Rather than making them work harder, you have to show them how to think in new ways.
We're looking for answers--I'm not sure we've found them yet. At GE we held an
innovation fair to look for new ideas. One image: You give a team an orange and say that
each person must handle the orange--you can throw it to each other, do anything you
want--but the orange has to end up in the hands of the person who started with it. The
group throws the orange back and forth, and you time it. The first time we did it, it took
nine seconds. When asked to improve, they stood a little closer, threw it a little faster, and
got it down to seven seconds. Then we said, "Many groups do this in less than a second,
and it's possible to do it in less than half a second." In the third trial, the team did it in less
than a second, by simply stacking up their hands. The guy with the orange dropped it, it
went swoosh through everybody's hands, and he caught it at the bottom--that was it. It
was a neat example of the power of a stretch goal.

Another thing that came up in the innovation fair was something called brainstorming.
When someone brings up an idea, you do a kind of carpet bombing. Everybody has to say
what they like about the idea. That's the support. Then they must bring up their concerns.
But you cannot bring up a concern unless you also bring up your suggestions to deal with
the concern. This technique takes the pressure off people and may help them think more
creatively.

How do you know stretch goals are working? You measure progress in three ways. One,
you compare what you're doing now with your own past performance; two, you look for
meaningful progress toward the stretch goal; and three, you benchmark competitors and
see if you're doing at least as well as they are.

And if it does work, what does the employee get out of it?

Money, for one thing. In a typical gain-sharing arrangement, you might split the
incremental gain or savings sixty-forty or fifty-fifty. Say, if the people at a factory save
$300,000, they get $150,000 and the company $150,000. Then there are the nonfinancial
rewards. These may include increased job security and personal satisfaction.

What are the most important things for managers to remember about stretch goals?

I think you absolutely have to honor the don't-punish-failure concept; stretch targets
become a disaster without that. Also, you have to provide the right tools. Finally, you
have to understand that stretch goals cannot be targets that you absolutely have to reach.
Because if you absolutely need the results, let's face it, you're going to have to punish
failure to reach it. On the other hand, there should never be excuses for failure to reach
real goals like quarterly earnings or sales targets. Stretch goals are supplemental to those
basic goals. All these points may not be rocket science, but you would be surprised how
often managers violate them.

FIVE WAYS TO GET MORE FROM PEOPLE

By definition, stretch goals are very difficult to meet. Don't punish people for not hitting
them.

Don't set goals that stretch your employees crazily. Understand that stretch targets can
unexpectedly affect other parts of the organization.

Don't give tough stretch goals to those people already pushing themselves to the limit.

Share the wealth generated by reaching stretch goals.

Copyright 1995 Time Inc. All rights reserved.

What are stretch goals?
\Philip Sutton
Director, Policy & Strategy
Green Innovations Inc
195 Wingrove Street
Fairfield VIC 3078
Tel & fax: (03) 9486 4799
http://www.green-innovations.asn.au/
Philip.Sutton@green-innovations.asn.au
18 August 2007 Version 1.b (Original: 26 October 2000)
Stretch goals and performance targets are very different things with quite different
roles.

If a person, organisation or society wishes to achieve a major change it is helpful to

use stretch goals in combination with short-term performance targets.

Short-term performance targets are used to specify the outcomes that can be fairly
confidently expected to be achieved in the near term. Such targets are based on known
technology and methods and readily accessible skills. They represent outcomes that
are realistically achievable - that is they do not present unusually difficult problems for
implementation.

Short-term performance targets can be expressed as either some increment of change

from the status quo or better still an increment of change towards a more ambitious
longer-term goal. It is reasonable for people to be held accountable for any failure to
achieve short-term performance targets.

Stretch goals however are used, not to drive short-term action, but to inspire longer
term innovation processes aimed at making desirable outcomes, that are currently

. While it might be
impossible, achievable at some future time

hoped to achieve a stretch goal either in

large measure or in full within a defined
time frame (usually quite some time into
the future) the timing of the achievement
of the stretch goal cannot be guaranteed -
it can only be striven for.
Du Pont has been pursuing a goal of 'zero accidents' for the last 200 years. While it
has not yet fully achieved this goal in every factory around the globe it has cut its
accident rate to a level that is very substantially under the industry average and it
continues to lower its accident rate every year. This is an example of a stretch goal
that has been substantially but never (yet) completely achieved. On the other hand
getting humans to the moon in 10 years was a stretch goal set for the US by President
Kennedy in the 1960s that was achieved in full - even though, at the time the goal was
set, it was not yet technically feasible.
The whole purpose of stretch goals is to inspire efforts to go well beyond what is
currently feasible and such goals are only achievable if they stimulate and inspire
creativity, invention and innovation.

There are two distinct types of stretch goals - intermediate-term performance stretch
goals and ultimate preferred-state stretch goals. A preferred-state stretch goal might be
"a fossil-fuel free economy". But an intermediate-term performance stretch goal
might be "a 60% annual CO2 emissions reduction in 50 years ".

The preferred-state stretch goal indicates what you would really like to achieve. The
intermediate-term performance stretch goal is an interim goal that challenges people
to try to do something that is technically known to be doable but which, in practical
terms, represents a major challenge of implementation. Intermediate-term
performance stretch goals are likely to be superseded as soon as it becomes technically
possible to do better. The improved technical possibilities may emerge serendipitously
but are most likely to emerge as a result of pursuing an ultimate preferred-state stretch
goal.

In the environmental arena preferred-state stretch goals can be couched in negative or

positive terms eg. zero waste, zero pollution or 100% renewable energy.

Stretch goals do not have to expressed in such all or nothing terms, but there is a
strong argument for pushing a stretch goal as far as possible in a desirable direction
because this creates the maximum scope for the application of creativity. The basic
formula might be to drive a negative condition to a zero level (eliminate the negative)
or to drive a desirable state to a 100% percent achievement level (attain the positive).

With such 'extreme' goals, care needs to be taken that their pursuit does not lead to a
single-mindedness that causes other problems to be created in the process. Stretch
goals should always be pursued within a "no-major trade-off" policy setting. To
ensure this outcome other complimentary policy goals need to be specified to provide
the necessary balance. Balance comes in this context not from trade-off but from
complementarity.

A comprehensive set of stretch goals aimed at achieving ecological sustainability can

be found at:
http://www.green-innovations.asn.au/ecolsust.htm#direction

Business orientated problem solving and opportunity creating tools suitable for a no-
compromise approach can be found at:

http://www.goldratt.com/

---end---