This “think piece” is designed to get you to take the time to reassess the value of stretch goals and how they can directly increase innovation.
Most leaders in business and in talent management know about stretch goals but they assume that they add only minor value. But that turns out to be a huge mistake because, at serial innovation firms like Google, Apple, and Facebook, stretch goals are a primary driver of innovation.
Yes, stretch goals are a major cause of innovation because they force employees and managers to think big. And when all employees have them, every employee, (and not just those in innovation jobs), now shares a common expectation for innovation.
This dramatic improvement in innovation occurs because when you set goals that are 25-40 percent above what most currently reach, you force workers and managers to dramatically rethink every assumption and approach. They are so impactful because as measured goals, they are constantly thought about and in addition, they force workers to reexamine everything, including all inputs, outputs, features, processes, roles, and accepted risk levels.
Stretch goals also force workers to abandon their typical focus on minor continuous improvement or Six Sigma tweaks that have no chance of reaching the 25 percent above normal threshold (I define 25 percent as the minimum for a stretch goal). And fortunately over time, both employees and managers will learn, as Google has, that most things in business can be improved by 25 percent or more. When you approach them with a constant innovation mindset, and when there is team pressure to innovate because every employee is equally charged with thinking big.
Learn From Google How “Thinking Big” Increases Employee Innovation
Google is the No. 2 most valuable company in the world by market cap and each Google employee on average produces an amazing $1.19 million in revenue each year. Its research has shown that companywide innovation can be increased by purposely increasing collaboration and learning. But in order to increase individual employee innovation every day, Google doesn’t rely on team retreats or “pillowed rooms”; instead, it sets stretch goals for each employee every quarter.
“A 10 percent improvement means that … you are guaranteed not to succeed wildly.”
“Set moonshot goals” and expect only a “60 percent to 70 percent success rate across everything we do.”
At Google, the driver of day-to-day innovation is the setting of stretch goals. The purpose of stretch goals is to get employees to aim dramatically higher and to hold hard-to-reach expectations. To make it clear to employees and managers how high they should be aiming, they don’t even call them stretch goals. But instead, they call them “moonshot goals” or “thinking big” goals because they expect 30-40 percent of the goals not to be met on the first try. Moonshot is an appropriate term because what they are expecting is so complex and difficult, that it is as hard to reach as the moon.
Google’s SVP of People Operations Laszlo Bock illustrates the benefit of stretch expectations with this quote “The ultimate aim isn’t to score a perfect 1, but to land somewhere between 0.6 and 0.7.” “The idea is that, if you score a 1, your objective was too easily achievable. If you score between 0.6 and 0.7, then you were probably thinking big.”
By setting a target of between 30 and 40 percent failure, Google makes it crystal clear to employees that the solutions that they expect must be truly innovative because innovation by nature has a high failure rate. So under their model, frequent failures on the way to success are accepted, as long as you learn from each one. At the same time, the expected success rate is not completely unreachable because that would cause the employees to get discouraged.
Apple, Facebook, and Amazon Also Expect Employees to Aim High
Apple is the world’s most valuable company with an average revenue per employee of $2.2 million per year, and Facebook is No. 6 in market cap (even though its IPO was only in 2012). Both firms have reached these astonishing levels because they emphasize the importance of setting high expectations. Here are some quotes that highlight their individual approaches:
“Hard is good. Easy is a waste of time” — Johny Srouji, Chip Design Manager At Apple
Run Fast And Break Things; Fail Harder; and What Would You Do If You Weren’t Afraid? — Facebook slogans that clearly encourage innovation with its high rate of failure
Serial innovator Amazon (No. 9 on the market cap list) also emphasizes the importance of stretch goals as part of its innovation process in one of its leadership principles “Be willing to fail — often. Amazon recognizes that failure is a natural part of the innovation process.”
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Tips for Setting and Managing Stretch Goals
Although setting stretch goals might seem to be intuitive, most firms don’t use them in a systematic and data-driven manner. So here are a few tips that will ensure that your stretch goals will directly lead to meeting the goal of 25 percent or greater improvement and innovation.
- Set high but reasonable targets — in the corporate world, the target for a stretch goal ranges between goals that can be met on average 80 percent of the time (e.g. GE) and as low as 60 percent of the time (e.g. Google’s lower limit). In some cases a few goals are 100 percent met, some will be complete failures and must be abandoned, while other goals may only have less than 50 percent progress when they are first introduced. It’s generally better to initially set passing percentages that are too low rather than too high. I define innovation as at least 25 percent new features or performance improvement, so if you have a different definition for innovation, set the target percentage where you can meet your required rate of innovation.
- Provide guidance to managers and employees — do not assume that managers will automatically know how to set stretch goals to get the desired effect. In fact, it’s best to assume that managers will naturally aim lower than your overall improvement target because that means less confrontation with their employees. Nudge managers by letting them know that they will be evaluated on their goal setting. You can also help managers and employees through coaching and providing them with clear examples, frequently asked questions, and dos and don’ts. Also, be prepared for an initial pushback from employees complaining that you are “asking for the impossible.”
- Universal stretch goal coverage is necessary — iif you exempt any major employee group from stretch goals, you may create an “us against them” rift in your workforce. And it’s hard for the entire team to be moving at the same speed of innovation if some employees and functions are exempt from moving at that accelerated speed.
- Tie rewards to developing goals, as well as performance on them — if you want employees to do “A” (i.e. improve results by 25 percent) but you reward them for “B” (i.e. trying hard) everything will literally fall apart. Obviously, an individual manager’s rewards must also be tied to accurate goal setting among their employees and they must be rewarded when their employees actually reach or exceed the target percentage of their elevated stretch goals (i.e. 6 out of 10).
- Spend time talking about goals and goal failures — failing to reach your goals as often as 40 percent of the time can be frustrating, especially if you have to handle that failure in isolation. However, one of Google’s secrets is to spend as much as 50 percent of each manager’s time talking with the team about failures and planning for future successes. “So by making conversation about misses normal, you end up actually driving lots of improvement in the organization” (Laszlo Bock).
- Guide them on how to identify performance barriers — in many cases, the primary reason why performance can’t be improved by 25 percent will be artificial or institutional barriers (i.e. updated rules or excessive approvals). Provide advice to managers and employees on processes for identifying those barriers and then guidance on the most successful approaches for minimizing or eliminating those performance barriers.
- Facilitate best practice sharing — create a forum, internal website/social media page, or a dedicated email list (listserver) devoted to the problems and solutions related to stretch goals. Make it easy for managers and employees to share their problems and their best practices related to stretch goals and innovation. Recognize those individuals who share their best approaches.
- Consider stretch assignments — often stretch goals in the same technical area or team won’t develop the individual as much as a stretch project or part time rotation. This rotation should cause them to develop at least 25 percent new capabilities and experience.
Stretch Goals Require “Outside the Planet” Actions
Most of us are accustomed to continuous improvement approaches, but those minor adjustments simply cannot produce results that reach the definition of a stretch or moonshot goal. Let’s use individual weight loss as an example. It’s relatively easy to lose a pound or two by simply eating wisely or exercising a few minutes more. However if you wanted to lose 25 percent of your body weight, you would need to abandon those tweaks and examine drastic new approaches that you yourself had never tried or even considered before. Yes, such a quantum change in weight would require a dramatically new way of thinking and acting. Although extremely difficult, the effort would be satisfying because the results would be dramatically better!
Since stretch goals have been around for decades, it is not surprising that most have taken them for granted. But fortunately for all of us, Google examined them and repurposed them into a major driver for big thinking and innovation. Its process makes it clear that simply raising the bar is one of the simplest but highly impactful contributors to innovation. And since innovation has such a high rate of return and it is now critical for success at almost every firm. Every leader in talent management should study, learn from and adapt Google’s successful approach for using stretch goals to drive innovation at your organization or corporation. Because making it harder for an employee to meet success actually increases your firm’s chances of success.
Related article — one of the inevitable outcomes of setting stretch goals for innovation is that employees will now face an almost shocking level of failure as a result of “moonshot thinking” and its related actions. On March 28, 2016, ERE.net will publish a companion article by this author entitled “Need Innovation In Talent Management? Discover How To Learn From Failure.” This article will cover how learning from failure can be the most effective teacher when you’re trying to innovate.