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Corporate 'stretch goals' can be risky

April 27, 2017

As companies struggle to maximize output while staying ahead of the competition, a study from University of Colorado Denver examines the idea of stretch goals and why audacious targets are frequently misunderstood and sometimes misused. Stretch goals differ from ordinary goals in that they display extreme difficulty and radical expectations, as well as extreme novelty in their approach.

The study, co-authored by CU Denver Assistant Professor of Management Dr. Kelly E. See, was published in Harvard Business Review.

Entitled “The Stretch Goal Paradox,” the study examines companies which set goals that initially seem unattainable based on current practices, skills, or knowledge. But some companies tend to fare better at this practice than others. Dr. See and her co-authors looked at numerous organizations that have set outlandish goals in order to determine which goal-setting practices work and which do not.

According to Dr. See, “Stretch goals are a widely used tool across many different kinds of organizations, ranging from well-known companies like General Electric or Toyota to governmental agencies. But without knowing when and how such goals work, it is difficult for organizational leaders and decision makers get a balanced picture of whether such an extreme tool will work for their organization.”

Identifying the criteria for success

By compiling data, case studies, and media reports from each of the companies included in the study, Dr. See and her colleagues analyzed the successes and shortcomings of each stretch goal. They concluded that two primary conditions are necessary for a company to achieve a stretch goal: First, a company needs to be in the tailwind of a recent victory, or have reached an important benchmark in its own history. This factor proves beneficial because winning impacts attitudes and behaviors positively, and recent wins may help companies both to identify and to actualize additional opportunities.

The second and perhaps more influential factor is that a company must have an abundance of resources. These resources can include money, people, knowledge, experience, and even the collective emotional intellect of employees and their leadership. With surplus resources at their disposal, such companies are better equipped to navigate potential pitfalls surrounding a stretch goal and to mitigate negative repercussions incurred by pursuing a stretch goal.

Many companies have succeeded with stretch goals, including Southwest Airlines and Colorado’s own DaVita. Both saw the need to explore dramatic changes using stretch goals in order to grow, succeed, and stay on top of the market. However, other companies such as Blockbuster, Kodak, and Walmart either failed to fulfill their own stretch goals or remained complacent when stretch goals might have propelled them forward.

Calculating the risk of failure

When not used properly, though, stretch goals can be a risk.

“In truth, most organizations are not well-suited to pursue stretch goals, and the risks will outweigh the benefits,” See said. “In our research, we wanted to provide some guidelines as to where managers should be able to tailor their practices to conditions most likely to lead to positive outcomes.”

While not every company is prepared to follow through on such ambitious goals, there are smaller steps any company can take. Pursuing even small wins can build confidence and momentum. See’s research indicates that stockpiling or enhancing current resources can increase overall performance, too.

The study’s co-authors are Sim B. Sitkin at Duke University’s Fuqua School of Business and C. Chet Miller of the Bauer College of Business at the University of Houston.