The Tricky Job of Setting Targets

Eric Kish
Eric Kish
Oct 1, 2018 · 6 min read

“The tragedy of life doesn’t lie in not reaching your goal. The tragedy lies in having no goals to reach”

Benjamin E. Mays — American Civil Rights Leader

The generally accepted method to set targets is to set SMART goals. They need to be Specific, Measurable, Attainable, Results-Oriented, and Timely.

The issue that arises with SMART set targets is that you really just end up remaining in your comfort zone. The human mind desires certainty and is averse to ambiguity and the unknown. Psychologists refer to this as cognitive closure. A heightened sense of cognitive closure can cause a person to latch onto the easiest tasks, freeze on a path regardless of changing information, and focus exclusively on finishing a task or project rather than on the results. The satisfaction that comes from completing a task really just becomes a means to an end.

Swedish psychologist, Anders Ericsson[1], has been studying human performance and expertise for decades. He has found that practicing the same thing over and over for hours and hours, whether it be sports, music, dance, or many other fields will not achieve the highest level of performance. One must consistently push themselves away from their comfort zone (a key component of deliberate practice) and combine it with the multitude of hours required. Only then can you possibly achieve the highest level of performance.[2]

However, there is a balance between a SMART target and an ambitious target. Ambitious targets were once thought to energize an organization and create spectacular results by pushing way beyond the envelope of the comfort zone. This was seen in the emergence of “stretch” goals, which is a target that intentionally involves expectations that are difficult to achieve. The idea behind this approach is that it would require creative thinking, thereby shaking a company out of a possible rut and bringing it to unprecedented heights.

One of the most famous examples of utilizing “stretch” goals was when General Electric (GE) introduced this management concept to their company in the 1990s. In fact, their CEO at the time, Jack Welch, was one of the earlier adopters of stretch goals and is believed to have coined the term.

In 1994, James Collins and Jerry Porrars introduced the term Big Hairy Audacious Goal (BHAG) in their book, Built to Last: Successful Habits of Visionary Companies. Their argument is that companies should define ambitious visionary goals in a more strategic and emotionally compelling approach to excite and motivate people.

The problem with both BHAG and the “stretch” concept is that they can actually end up being terribly demotivating. When a target is perceived as unattainable it can become overwhelming, undermining the employees’ intrinsic motivation. The enormity of the problem causes people to freeze up.

In The Folly of Stretch Goals[3], Daniel Markovitz calls them a managerial absurdity that should be dispensed of once and for all. He quotes psychologist Karl Weick from his classic article, “Small Wins” that people often become overwhelmed and discouraged when faced with massive and complex problems.

It is most executives’ dream to transform an organization by achieving seemingly impossible goals through sheer willpower. Indeed, in countless business narratives, the practice of setting such objectives has been celebrated as a monumental success. However, it is important to acknowledge that in practice, stretch goals rarely work out. This is what the authors of The Stretch Goal Paradox, Sim B. Sitkin, C. Chet Miller and Kelly E. See, show by giving the recent example of Marissa Mayer, when she took the helm of the ailing internet giant, Yahoo, in 2012.

Upon being appointed as president and CEO she announced a number of wildly ambitious targets, including the exceptionally difficult objective of achieving double-digit annual growth. Fast forward five years and she’d fallen far short on them all. Yahoo was sold to Verizon in 2017.

I utilize stretch goals differently. To me they are a supplement to a Target, being still in sight of but just outside of the comfort zone. I am a big fan of three-tier goal setting systems. A three-tier goal setting system contains a Target, a Stretch and a Threshold. The Threshold being the level under which performance would be considered a failure.

Why a three-tier goal system? We are conditioned to think in threes: small, medium, and large; gold, silver, and bronze; good, better, and best. Behavioral psychologist and bestselling author, Dan Ariely conducted an experiment where he offered three different subscriptions to The Economist.

Option #1: Online subscription to The Economist at $59

Option #2: Print subscription to The Economist at $125

Option #3: Print & online subscription to The Economist at $125

When presented with these three options, an overwhelming majority of 84% picked Option #3. As you can see there is no difference in price between Option #2 and Option #3. However, when he removed Option #2, the majority of people started picking Option #1: the cheapest option. This is called anchoring. The idea is to anchor the mind above the Target by using a Stretch, while distancing it from the Threshold.

A good rule of thumb in setting a three-tiered target is this:

To make it easy to compare performance across metrics you want to normalize all metrics to one common scale. I use a 1 to 10 scale. On this scale I will have three levels of performance. The Threshold, set at 3.3, tells me that everything under is a failure. The Target, set at 6.7, will be the commitment to deliver. The Stretch, set at 10, will be considered exceptional performance.

Metrics in utilization with targets are intended to provide vital navigational instruments that allow everyone in the organization to understand the current level of performance. Although to be clear, like everything in life, where there is light there is dark. If you’re not careful, well-intended metrics can turn toxic.

Consider this classic example of a nail factory from the Soviet Union days. When the central planners defined output targets measured in weight, the factory produced a small number of very heavy nails. Obviously, people in the Soviet Union didn’t just need massive nails so the target was changed to the number of nails the factory had to produce. As a consequence, the nail factory produced a massive amount of only tiny nails.

So in conclusion, the tricky job of setting targets ultimately comes down to a balance of utilizing a tiered system tailored to the goals of each organization.

From the book 5 to 50 to 500. Copyright © 2018 by Eric Kish

Eric Kish as an author, speaker and practicing CEO. He is the author of 5 to 50 to 500: How to build and run scalable organizations and Everyday Turnaround: The art and science of daily business transformation

[1]K. Anders Ericsson is a Swedish psychologist and Conradi Eminent Scholar and Professor of Psychology at Florida State University. He is internationally recognized as a researcher in the psychological nature of expertise and human performance.

[2]”The Art And Science Of Goal Setting –

blogs.allari.com/the-art-and-science-of-goal-setting

[3] hbr.org/2012/04/the-folly-of-stretch-goals

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