The Dangers of Stretch Targets

Reading Stefan Stern’s article “The art of stretching employees” (Financial Times February 25th 2008) reminded me of some of the problems associated with the popular management by “stretch” philosophy. You know what I mean – asking employees to do the seemingly impossible for example achieve 60% growth after a year of 30% growth.

There’s more to leadership than asking employees to do the near impossible – there’s an order to things and a couple of pitfalls to avoid.

A Certain Order to Things
I spent a fair amount of time reviewing more recent research when compiling my last Executive Briefing on the Balanced Scorecard – and I came across an interesting piece of academic research on stretch targets. The basic conclusion of the the research is that there should be a certain order to things when considering using stretch targets. The central message is “think about the skills, experience and knowledge that your employees need to take on that near impossible stretch target and set a target to achieve those competences before you hit them with the stretch objective.”

Quite commonsense really. So make sure that your scorecard can measure new competency acquisition as well as stretch.

A Couple of Pitfalls
Whilst writing this entry on a rather grey Thursday afternoon, two other potential pitfalls spring to mind. These are:

(a) Capacity. What if your people are successful and pull in that 60% growth. How are going to handle it? Is your business planning (and financial modelling) process good enough to link growth with that most precious of all resource – people – I mean here the capacity to handle all those new customers?

(b) Exhaustion. In my Executive Briefing Success: Your Biggest Problem? I warn against corporate exhaustion “here growth and acquisitions stimulate internal reorganization and restructuring. Such structural changes bring with them risks of loss of control and even loss of identity. The enlarged business starts to wonder what its core activities really are.” So just be careful – years of stretch may lead to tiredness, confusion and failure – if you don’t keep an eye out for the symptoms.

It’s great to be ambitious and leaders must build ambition – but they need to build capacity as well – there is after all a certain order to things.

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