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Why Stretch Goals Waste Time And Money

In "OOPS! 13 Management Practices that Waste Time and Money (and what to do instead)," workplace behavior expert Aubrey Daniels reveals why common business practices—such as annual bonuses, automatic pay raises, and layoffs—actually reward bad behavior.


In this excerpt, Daniels examines the problem with stretch goals.

Probably nothing I have said in seminars and my books upsets more managers than my saying that stretch goals are an ineffective management practice, and, as such, a waste of time and money. This flies in the face of their own personal experience, as they have been successful in getting performance improvement by challenging employees to "stretch themselves." In fact, most managers have had the experience of having employees perform above the initial goal, even if they didn't reach the stretch goal. So what is the problem?

While there is a large amount of anecdotal evidence that stretch goals work, the research is far from conclusive. As a matter of fact, one study of stretch goals found that performance decreased over time, as individuals repeatedly experienced failure in their attempts to achieve assigned goals. This is bound to happen when using "stretch goals" since they are defined by researchers as those that are attained less than 10 percent of the time.

Why would a manager set a goal employees will fail to reach 90 percent of the time? On the face of it, it makes no sense. The answer, of course, is that they mistakenly believe it will motivate employees to achieve more than they would by only setting reasonable goals. It doesn't. What most managers don't understand is that goals are motivating to people only when they have received positive reinforcement for reaching them in the past. Stretch goals almost always are driven by negative reinforcement—not by design, but because most managers don't know the difference between positive reinforcement and negative reinforcement.

One reason stretch goals are set is that setting such goals often is sustained by the popular corporate culture that believes the really hard-nosed and great managers always demand the stretch and "their teams will reach for those impossible goals or else." The fact is that while employees may reach and may succeed on occasion, it is not in the setting of the goal but in the day-to-day actions of the manager that success is achieved.

There are better ways to reach what may appear to be the impossible that don't involve stretch goals at all. There is considerable confusion about the differences between stretch goals, innovation, and creativity. If you are a long way from where you need to be, but have a process where you know what you ask is possible—either because others in the organization are performing at where you need to be, or your competitors who are using the same process and/or equipment that you are, are performing where you need to be—goal setting is appropriate.

On the other hand, if you need improvement levels that are beyond the capability of the current process, then you need creativity or innovation. It is common for managers to use stretch goals when they need creativity and innovation. Creativity should be separated from goal setting since they involve separate and incompatible behavioral processes. Creativity typically requires an abolition of existing ways of doing something so novel ideas can emerge. Goal setting involves behavior shaping.

Shaping involves the positive reinforcement of small improvements on the way to a final goal. When trying to improve on an existing process, incremental goals work best—actually, the smaller the better, as small improvement targets provide more opportunities for positive reinforcement, which increases motivation. Goal setting is best used in situations where working more efficiently will achieve the desired outcome.

If employees are working as hard as they can and cannot reach the desired or necessary performance level, creativity is required. Creativity is by definition "out-of-the-box thinking" and often involves a radical departure from an existing process. In the vernacular, it usually is called "working smarter." Getting people to work smarter requires lots of reinforcement for generating ideas, and a high tolerance by managers for testing ideas that don't work. Properly done, there is much positive reinforcement to be found in working to discover novel approaches to routine processes.

What makes stretch goals an even more wasteful practice is when managers reward employees even when they did not reach the goal, but worked hard and were "close." What this communicates, whether intended or not, is that reaching the goal is not all that important. Behavior is more important than results. It is always appropriate to provide positive reinforcement for an increase in goal-directed behavior. This should be done on a day-to-day basis. However, giving the reinforcement and rewards for reaching the goal is not appropriate even though employees barely missed it.

Does this mean we should not have lofty goals, or settle for something less than the best? Absolutely not! We want our organization to be the best in every way. The question is not whether we should have goals and standards, the issue is how to get there, and how to continue to make improvements.

Stretch goals are based on the faulty assumption that you have to pull performance out of people, and if you don't continue to challenge them, they will settle for something less than they are capable of doing. Most managers have never had the thrill of setting goals where people have blown them away—reaching a goal in a fraction of the time set for the accomplishment, or accomplishing two to three times the goal amount. There are much more effective ways to motivate people to high levels of performance and achievement than by using stretch goals.

How to Make Goals Work for You
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 to set and achieve subsequent goals. Success breeds success. In the words of the cognitive researchers, such conditions produce self-efficacy and commitment.

Incremental goals combined with graphic feedback and frequent positive reinforcement will not only produce better results but will create an environment where people will have fun accomplishing them. What more could you ask for?

Daniels and Laipple have worked with many leading companies, including Roche, Aflac, and Daimler Truck Financial, to create behavior-based sales systems that help sales managers exceed sales numbers, faster, with fewer people, and with less long-term effort. Daniels has appeared on ABC News and CNN and has been featured in USA Today, The Wall Street Journal, and The New York Times. For his take on the latest management trends news, please visit his blog at www.aubreydanielsblog.com.