A routine piece of advice from consultants is that managers should set stretch goals. By this they mean setting goals that are hard to achieve but attainable—for example asking a sales representative to increase sales by 15 percent. While managers need to be careful about setting stretch goals year after year (it can wear out the employees) it makes sense to strive for continuous improvement.
However, there is another kind of goal that human resources rarely talks about: the audacious goal. Asking the quality team of a bicycle manufacturer to reduce defects by 90 percent is audacious. Asking a team that has only operated in Greece to set up a new retail chain in Poland that will be profitable in the first year is audacious.
With stretch goals we are confident that if the employee works hard they will be able to achieve them—or at least get close. With audacious goals we have no such confidence. Can we really expect the team to reduce defects by 90 percent? Can we really expect profitability in the first year in Poland?
There two different situations for setting audacious goals. One is in the face of the unknown. The other is when the company needs a breakthrough.
Opening a new retail chain in Poland is an unknown. It may be that by working hard and being clever the team will find they easily achieve profitability—or they may find it far beyond reach. You don't know. You just have to try. What you do know if that if you set a more reasonable goal like "be profitable in three years" then it is very unlikely they will be profitable in year one.
The other type of audacious goal, like reducing defects by 90 percent, is one where you know that a good solid effort won't even get the team close. This kind of audacious goal demands that the team invent a new approach. It may be possible, it may not be. You just have to try. Companies occasionally need big leaps forward and you don't get breakthroughs unless employees try to create them. And there are plenty of cases where firms have found that big leaps forward are possible.
Audacious goals are a problem for HR because they do not fit the normal performance management scheme. First of all they tend to be accomplished by teams not individuals. Secondly, you cannot give someone a poor performance rating for failing in a goal that management realizes may be impossible. And if audacious goals are a problem for HR then it means HR is a problem for the organization. HR's normal performance management system is preventing performance.
Fortunately, the solution is relatively simple. First, HR should work with managers to distinguish between the normal course of business (stretch goals) and leaps forward (audacious goals). One could even simply put a check box on the goal setting form saying, "Check box if goal is audacious and meet with HR to discuss alternative reward schemes." What's critical to understand is that most performance appraisal systems will punish managers and employees who risk taking on audacious goals. HR needs to show that there is a way around the normal system.
The second step is to decide how to deal with appraisal and reward for the particular audacious goal. How you do this is a matter of circumstance and culture. Some times organizations might want to attach a large reward to a breakthrough. In other cases they may decide simply to reward on effort not results. As with all incentives schemes there are disadvantages to both these approaches. The disadvantages usually cannot be removed by re-designing the incentive program; they have to be handled through good management (i.e. what is communicated on an on-going basis over the life of the project).
Breakthroughs are possible. I've had occasions where my managers have set impossible goals (e.g. increase the number of articles published by 400% in 2 months) yet I found there was a way to achieve those goals. Employees who commit to making a breakthrough can achieve surprising things. However, they won't want to commit if the whole performance management system is designed around stretch goals. HR needs to provide an exit from the usual performance appraisal system to deal with these special cases.
David Creelman is CEO of Creelman Research providing writing, research and commentary on human capital management. He works with a variety of academics, think tanks, consultancies and HR vendors in the US, Japan, Canada and China. He occasionally gives speeches.
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