January 18, 2021
There are many wrong ways to set stretch goals.
Leaders who know how to set stretch goals correctly are perceived as significantly more effective leaders, and they also raise the level of employee engagement. To demonstrate the impact of leaders who are effective at setting stretch goals, my colleague Jack Zenger and I gathered data from direct reports of over 76,000 leaders. In the graph below, we show leaders’ effectiveness at setting stretch goals going from those that were rated the worst (1st – 9th percentile) to those who were rated the best (10th to 100th percentile.) The bars represent the overall leadership effectiveness rating of direct reports based on 15 competencies and the employee engagement score of those same direct reports.
It seems clear that leaders who are skilled in setting stretch goals are rated as significantly more effective leaders and have direct reports who are highly engaged.
Example of A Stretch Goal Gone Wrong
Several years ago, an interview with the senior leader of a division in a large organization was presented as an excellent example of setting stretch goals. This leader was convinced that the organization needed to cut costs. The overhead had grown more than the organization’s profits. He came out with a bold announcement to the organization that every department was to cut costs by 15%.
In the interview, he was privately asked how he came up with that number. Was it based on some calculation or comparison to competitors? His reply was, “No, I was thinking about what the number should be, 20% seemed like that would be too difficult, and 10% wasn’t enough to make a difference, so I decided on 15%.” That number was based totally on intuition.
Departments were given 30 days to come up with a plan for the cuts in their department. If a department came in with anything less than 15% regardless of the rationale or logic for how the cuts would hurt more than help, they were sent back and told not to come back until they reached the magic number.
They were also reminded that if they could not find a way to cut back, then they would be replaced. The process took on a very negative tone. People came up with derogatory nicknames for the executive. In the end, the cuts were achieved. Unfortunately, in some cases, the cuts were too deep, and some departments needed to hire back more resources. The process was, by and large, viewed as a negative event, and it created a great deal of resentment. At corporate, however, it was viewed very positively. They thought this was a textbook example of how a leader ought to set stretch goals.
Clearly, the goal was a stretch goal, and the reduction process may have been necessary for the organization, but the execution drove employee engagement down rather than up.
How To Achieve Your Stretch Goals
Many leaders, when faced with the objective of setting a stretch goal, simply multiply goals by two. Leaders need to understand that the skill of correctly setting stretch goals requires three critical skills: Push, Pull, and Problem Solve.
In the example from the case study above, the leader did one of these three well. He knew how to push. Leaders who do this may achieve some short-term gains but end up without the great benefits that come with doing it correctly.
Push. For a leader to be effective at setting stretch goals, there needs to be some push. Asking a team to set a goal that is achievable and where everyone is comfortable will not be a stretch goal. It will not have a positive impact on your leadership effectiveness or the engagement of employees. Achieving something very difficult creates positive engagement. People want to accomplish something that feels impossible, and when they do, they feel they are special. Leaders push by setting the goal high, by establishing a deadline and by holding individuals accountable for achieving their specific piece of the goal.
Pull. Pull is inspiration, energy, and excitement. Without pull, the employees feel like galley slaves working hard to avoid punishment but having no vision of where they are going and why they are going there. The pull aspect is more important and more difficult than the push. Leaders know how to push. Most of us learn to push from our parents early on in life. Leaders who know how to pull share a clear vision and communicate that vision to others. Leaders that pull are quick to recognize people for their contributions. They are role models and lead from the front. They get cooperation from others across the organization and provide coaching and development.
Problem Solve. Without problem-solving, a stretch goal can only be accomplished by working harder, faster, or longer. Problem-solving involves a clear understanding of the problems, trends, and opportunities. Stretch goals will require needed changes in how work is done, relationships, partnerships, and infrastructure. Leaders need to be willing to challenge standard approaches and find new innovative methods. They need to be aware of outside trends that could help or hurt internal efforts.
Impact of the Three Critical Skills
A leader’s skill at these three critical capabilities impacts their ability to set stretch goals effectively. By looking at data from over 100,000 leaders, we can accurately estimate the impact. For example, if a leader were above average on push but below average on pull and problem solving, their effectiveness on setting stretch goals would be at the 44th percentile. If a leader was rated at or above the 75th percentile on push, but below average on the other two skills, their effectiveness at setting stretch goals would only move to the 49th percentile. The graph below shows the impact of effectiveness at setting stretch goals along with their ability on the three critical skills. It is interesting that if a leader is above average on all three skills, their effectiveness at setting stretch goals is at the 79th percentile. Leaders should set as a minimum that all three skills should be above average.
It is the time of year to set some goals. Make sure you do it the right way.
(This article first appeared on Forbes.)
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