Setting goals, whether at the individual level or for an entire organization, can be one of the most difficult things for a manager to do. Are goals targets that must be met exactly, or are they long-shot dreams the organization should be trying for? How does one set goals that will challenge the workplace to reach new heights? The concept of stretch goals seems to be the sort of performance every business wants, but in reality, the implementation of such stretch goals is more complicated.

Setting SMART Goals

The traditional knowledge is that goals should be SMART: Specific, Measurable, Achievable, Relevant and Time-based. This mnemonic device captures the general best practice of setting goals that are important, easy to understand and provide metrics that quantify success. The SMART goals concept works well for roles where it’s important to stay on task, get things done and measure achievements.

That said, consider the A in SMART: Achievable. If a goal is easily achievable, that’s great for employee performance management reasons, but the results will be the same as before. For a company looking for a big change of direction, will these small achievable goals be able to provide the drastic improvements they’re looking for?

Stretch Goals Definition

Stretch goals are best defined as targets designed to push a person, team or company further than they’ve ever gone before. The premise operating behind this is that setting these ambitious targets will encourage people to work harder than ever, stepping outside their comfort zones and engaging in different behavior in an attempt to reach these goals. A stretch goal is meant to be a catalyst for change in the workplace; challenging a team to go above and beyond their normal state can reveal places where processes need to be revamped or even eliminated, breaking them down to their bare bones to find the weak spots.

Stretch goals differ from standard goals in two important ways:

  • Extreme difficulty. The goals may not even seem achievable at first glance; the expectations likely go far beyond the current capability of the team or company in question. Stretch goals are a direct challenge to the current level of performance.

  • Extreme novelty. These goals will require changes in the way the day-to-day business operates; the gap will only be made up by working differently, rather than working harder. Solving the problem will require new solutions and tools that don’t currently exist.

Advantages to Stretch Goals

There are advantages to setting stretch goals, the main one being to push the limits of current performance and challenge the status quo. Making people look at the way they work, while wondering how to meet this significant target, fosters innovation and critical analysis where there may have been no reason to do so before. Even when stretch goals aren’t met in full, it’s likely that significant positive progress has been made in the attempt to reach the stretch target; the company may still see improvement in the right direction even when the target is missed.

These benefits, combined with the potential reward of breakthrough progress, are enough to make many executives tempted to set stretch goals for everyone.

Disadvantages to Stretch Goals

However, there are disadvantages to stretch goals as well. They won’t work for every company; in fact, most historical data shows that companies that set stretch goals rarely meet them, or even reach performance close to that level. Setting a stretch goal that seems absolutely unachievable with no explanation will eat away at the trust between employees and management, leading to thoughts like, “Management doesn’t understand how things work” or “I guess we won’t be getting our bonus this year.”

In these cases, these thoughts can be a self-fulfilling prophecy; as teammates continue to feel helpless, motivation dies and company performance stumbles along with it. And if the company fails to meet a stretch goal, but continues to set them, employees are likely to lose confidence in the company and start searching for alternative employment.

When Stretch Goals Work

When considering setting stretch goals for a company or team, it’s important to first consider the context. Historically, there are two critical factors that play into whether or not stretch goals produce the desired positive change versus creating fear and instability.

  • Recent Performance: Has the company just hit a major benchmark, or had some other major win? Has the department just successfully completed a major project? If the company has forward momentum from a recent positive event, it’s more likely to engage at the thought of a stretch goal and has a much better chance of achieving those goals. If performance is faltering, however, it’s much more likely that employees will look at stretch goals as a threat, creating a mindset of failure right from the get-go.

  • Available Resources: Businesses that are well-resourced in funding, employees, knowledge and facilities are much more likely to be able to take advantage of a stretch goal, as there’s some resource slack that can be applied to finding new solutions. Businesses that run on bare-bones funding or reduced manpower, however, don’t have much energy to spare looking for new solutions and are more likely to prioritize short-term fixes over long-term change.

When to Use Stretch Goals

The best combination, and therefore the best time to reach for stretch goals, occurs when a business performing well has a big win and a resource pool with enough slack to be able to truly devote time to achieving the goal. The combination most likely to fail at meeting stretch goals is when a company is already underperforming and has very limited resources to work with at the time.

It turns out that struggling businesses running on empty are, however, more likely to reach out for stretch goals, thinking that all they need is that one breakthrough change to fix a bad track record. As a company’s performance continues to falter, many executive leaders will accept more and more risk in the hopes of seeing some kind of positive reward.

How to Use Stretch Goals

With this in mind, how should management approach the process-changing opportunities stretch goals bring while avoiding the potential disadvantages? As mentioned, first consider the context. Are these goals for an individual, a team or an entire organization?

Stretch goals on a smaller scale, for example, setting an aggressive sales target or a significant cost-savings target, can work to drive individuals to try new things, but can also falter if that individual finds they need to implement changes to processes outside their control. Stretch goals for a team can find success when the team members have enough time to really consider the problems they face, and in organizations where experimentation is allowed and failure doesn’t have a negative correlation. On these levels, implementing maybe one or two stretch targets can help encourage breakthroughs — but they may be too small-scale to change the entire course of a company.

For management looking at a business as a whole, the business’s current position is the context, and it matters. In organizations that don’t have resource slack, it’s often better to focus on incremental improvements until some of that resource space becomes available for further problem-solving. In organizations performing poorly, it’s best to focus on the fundamentals and smaller changes that are easier to adopt. But for a business that’s in good standing, with a decent resource pool, stretch goals can be a way to challenge employees to push performance to new heights.