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The Water Cooler

A blog of fresh ideas and findings from organizational leaders and researchers on how they’re making work better, shared regularly.

When should you shoot for the moon?

Filed under: Goal Setting
When should you shoot for the moon?
Companies are enticed by stories of firms who pursued a moonshot, risked it all, and won big. And research shows stretch goals can produce outstanding returns, but only if the conditions are right.

Drawing on a substantial body of academic research, my colleagues and I define stretch goals as seemingly impossible targets – you don’t know for sure that it cannot be done, and there is no known path to get there. These big, ambitious goals have two defining qualities:

  1. Stretch goals are are extremely difficult.
  2. Stretch goals are novel.

And when they solve important problems, there could be a big payoff. The moon landing, the smartphone, the Panama Canal – none would have been achieved without a stretch goal.

The problem with stretch goals is that the individuals, teams, and firms most likely to take on a stretch goal are often the least equipped to succeed and almost always fail. In contrast, those who have the ability and resources are best positioned to succeed at stretch goals – but tend to sit on their hands and play it safe.

Our research suggests that having recent success and adequate resources can help stimulate creativity, the identification of new opportunities, the systematic processing of information, and strategic flexibility. This can create a sense of comfort, but it’s really the best time to try for really radical innovations. And even if your your next attempt fails, you’re still better positioned to achieve something really significant over the long term.

In contrast, if you’re coming off a recent failure, you might be tempted to go for broke, but our research shows that when recovering from a recent failure, the adoption of stretch goal appears to stimulate a very different set of mechanisms – fear, defensiveness, grasping for quick fixes to complex problems, increased perception of threats, and rigidity. You should instead resist the urge and not attempt stretch goals.

In order to know whether or not to take on a stretch goal, you must first evaluate what it will take to succeed. Let’s look at an example to illustrate.

In 2011, health care firm DaVita set out to save $60-80 million in four years through internal organizational experiments. They had no idea if the target was remotely possible, but they started by creating a “Pioneer Team” that combined front-line clinical staff, engineers, project managers, and Six Sigma experts. This team took a “community design” approach and developed a range of effective interventions that simultaneously improved patient outcomes, reduced costs, and enhanced staff satisfaction. They succeeded because they were choosing to stretch from a position of success (with growing revenues and profits and a lauded business), not to recover from failure, and because they provided adequate resources for the initiative.

Many firms in DaVita’s position sit on their laurels and become risk averse. They shouldn’t. Instead, individuals, teams, and firms in the position of DaVita need to fight the tendency to become conservative when they are successful and have ample resources. For individual success, shareholder value, and for our society to continue to solve big problems, we need those who are successful to step forward and take the chance on doing something big. But research suggests they don’t.

This doesn’t mean that struggling individuals, teams, or companies shouldn’t set lofty goals. But they need to be more realistic about what they can achieve and thus be more modest about the goals they set. Because of their limited resources and lack of momentum, they are less likely to succeed. Specifically, research provides two strategies for such situations:

  1. Pursue small wins to build resources and confidence
  2. Undertake experiments that can result in small losses from which you can survive and learn

Stretch goals are neither a magic bullet nor snake oil – but depending on the circumstances, they can look like either. The burden is on us to know when to use stretch goals and when to avoid them and use alternative strategies.