After over a decade as a startup executive, I’ll admit I cringe when someone brings up stretch goals. But Dave, according to Google, they’re best practice! It says it right there in their 10 things we know to be true philosophy document: “We set ourselves goals we know we can’t reach yet, because we know that by stretching to meet them we can get further than we expected.” Shouldn’t we all get on board with this? No, sorry Googlinos. Absolutely not.
Here’s the thing: startups and Google, at this point, have virtually nothing in common. At the time of this writing, Alphabet is the 4th largest company in the world, with just under a trillion dollars in market cap. Is this really where we should be looking for our startup wisdom? Just because Google, at one time, was a startup itself? So were Apple, Microsoft, and Amazon!
According to Fortune Magazine, 9 out of 10 startups fail. This means that startups are actually just one giant stretch goal: build a successful company. Isn’t that challenging enough?
What are stretch goals, exactly?
Stretch goals have a great, well-branded, benign-sounding name. This may help explain why everyone has been in such a hurry to adopt them. They’re just like they sound: a goal just a bit beyond the limit of what is currently possible, to encourage you to push just a little bit further. This is how physical stretching is done. If your goal is flexible hamstrings, this approach works great.
A lot of the thought leadership on stretch goals differentiates between “moonshots” and “roofshots”, again, thanks to Google’s methodologies.
What is a moonshot?
Moonshots are super lofty goals that it’s unlikely you’ll achieve exactly as they’re conceptualized. The point of moonshot goals is to redefine the way you view possibility. And, when you actually hit a moonshot goal it’s the kind of thing that will change your entire business, or maybe even the entire world. But you may not hit your moonshot goals very often. If the goal itself has a positive impact on your vision and choices along the way, though, many feel this is a good tradeoff. Elon Musk would certainly agree. Just realize, moonshots move away from the stretching hamstrings example: you’d tear your hamstrings before hitting a moonshot goal in the yoga studio.
What is a roofshot?
Roofshots are goals designed to be roughly 30% out of reach, meaning that unless something changes from your prior period, you’ll achieve 70% of the goal. The purpose of roofshot goals is to drive continual innovation and improved problem-solving. If you factor in the concept of compounding, think about how fast a company will grow if it’s improving by 30% each quarter! The real key to making roofshots work for you is to understand the amount of time they’ll need in order to be achieved. Can your hamstrings get 30% more flexible every time you stretch? No, probably not. But can they get 30% more flexible each quarter for the first year you’re stretching regularly? Yes, probably.
On many levels, this way of thinking seems to make sense in business, too: shouldn’t we always be trying to improve on our last performance? Go farther? Do better? Yes, of course, we should. It’s important to recognize, though, how subjective “better” and “further” are in the course of startup life.
Why don’t stretch goals always work in startups?
Everything’s a stretch goal already
First of all, most job roles in startups are one-offs, and most projects and goals are one-time gigs on the way to building a more scalable structure. This makes goal-setting challenging by nature. Most of the things you’re working on have never been done yet… which makes just about everything a stretch goal!
That’s not a bad thing; it’s a good thing. For those of us who love startups, the newness, challenge, risk, and necessity of innovation are what drive us. But aren’t those things challenging enough? If we’re engaged and locked on target, what’s the point of cranking up the already considerable pressure further? It seems unnecessary and counterproductive.
Lack of data
If you’re Google and have 20 years of product management and engineering data collected from a team of 12,000 international engineers you know exactly what great, average, and poor performance look like. If you want to set stretch goals for your engineering teams to help push their performance up the bell curve it makes absolute sense.
However, the lack of uniformity in roles and repeatability of projects in startups means there’s little data to predict what is possible: the boundaries of possible haven’t been set yet. If you don’t have enough data to be data-driven, when you set a goal you do it by getting your team together and estimating what they think is possible.
If all you’re doing is taking their answer and dividing by .7 to set a target, you’re screwing your team. You have no data to show the expanded goal to be a good idea or a feasible stretch, just your own ambition.
Worse, the message you’re sending is, “I think you’re trying to pad your goals and not trying your hardest, so I have to step in and make sure you work hard enough.”
Stretch goals require more resources
Startups are inevitably resource-constrained. If you want your team to have a real chance at achieving stretch goals, you also have to be prepared to offer them additional resources. These resources can come in the form of skill training, leadership mentoring, additional software and tools, time from other team members, or even just the freedom to carve out more time for brainstorming and innovation sessions.
If you don’t give them additional resources and support, where do you think the different results will come from? If you’re not careful, all you will have done is created a system designed to force your team members to commit more hours! If you’re a startup they’re probably working tons of hours anyway. Heaping on the pressure will just accelerate them toward burnout.
You’re inviting more failures
There’s no denying that being aggressive with your goal setting will lead to some awesome successes. However, if you’re constantly setting goals just beyond “possible”, the reality is that many of these targets will be missed. If this happens too much, think about the impact it will have on you and your team. Do you like missing? Losing? Feeling crappy? Constantly falling short? Why should we stack the deck against our teams by introducing even more failure into their days, weeks, quarters and years?
Even without stretch goals, challenges abound in a startup! It’s risky to invite more failure into your culture. As discouragement and pressure mount, a previously great culture can begin to slip. Members of your team may start cutting corners, or sacrificing important company values in exchange for short term performance, just to hit near term metrics. Tunnel vision can set in, causing some teams to focus on a stretch goal at the exclusion of other important projects. And at worst, your team may get discouraged and stop caring about their goals because they’re so tired of wearing themselves out without hitting them.
You’re playing the opposite of Moneyball
As well illustrated in Michael Lewis’ best-selling book, Moneyball, the secret to winning in baseball is getting on base. Taking a walk or hitting a single may not be glamorous, but these smaller, higher-probability wins are what rallies are made of. If a baseball team is losing a game badly, the last thing the manager does is send all his hitters up to try to blast home runs: the harder you swing, the more you strikeout.
Building long term business success is the same. You’ll create more momentum and progress piling up smaller wins with higher chances of success than you will by setting too many moonshot goals. That being said, almost every baseball team has at least one home-run hitter in the lineup. Don’t exclude them entirely. Be judicious.
When you miss, the board meetings will be miserable
There’s some inherent nobility in setting stretch goals. However, if you base your budget on these stretch goals then you’ll probably end up reporting negative variance in more board meetings than not. Explaining repeated misses to your board is a miserable experience. They might give you kudos for your courage the first few quarters, but that enthusiasm will wane quickly and you’ll lose credibility thereafter. The occasional quarter of outsized performance will be fun, but most boards prefer you pick up the knack of accurate forecasting.
So are stretch goals all bad?
Of course they’re not! I wanted to lead with some notes of caution because stretch goals can backfire spectacularly. That being said, they can also be extremely powerful tools for growth. The trick is using them appropriately.
Keep the moonshots to visions, not repetitive operations
Depending on who you talk to, Elon Musk is either a genius visionary or a naive lunatic. He’s probably both. Be aware that if you’re a CEO and leading with moonshots, you’re going to be in this category, too. It’s visionary to create a company whose mission it is to replace all fossil fuel vehicles. It’s naive to believe you can ramp production to hundreds of thousands of units in less than a year without investing billions in new factories. Musk’s grand visions are the moonshots he uses to shape the world and we’re all better for them. But his operational stretch goals always seem to miss and hurt his credibility as a CEO.
Use stretch goals when your team is on a roll
The best time to leverage stretch goals is when your team is already performing at or near peak. Proven success creates momentum and confidence. Your team will engage more readily with challenges when they’re riding high: “possible” is based on perception and is 100% relative. If well-timed, stretch goals can help pull your team into a boundary-expanding flow state. In contrast, the last thing your team will want when they’re in a slump is for their goals to get even harder to achieve.
Creative areas lend themselves quite well to stretch goals. Challenging your teams with stretch goals, even moonshots, works great when they’re working on problem-solving and solutions. Boundaries squelch innovation. Creativity expands to the size of its container like a gas. Encourage your team to unlimited creativity with no fear of failure. Stretch their ideas. Stretch their visions. Encourage stretch solutions.
Focus on qualitative rather than quantitative goals
Stretch goals work great in areas where rapid transformation is possible, like customer satisfaction. As an example, it’s possible to completely transform a customer relationship in no time at all by creating a new level of understanding or connection. Similarly, it’s possible to improve product quality by aiming higher and giving your team space to create.
Volume-based goals, though, like product assembly, are generally subject to time constraints. In these cases, stretch goals won’t work as well unless the goal is about process improvement, not just volume. If a team member can assemble 10 units per hour, challenging them to assemble 13 units per hour won’t accomplish anything unless their process evolves somehow. In that case, the goal isn’t really the volume at all, it’s process innovation.
Use stretch goals when you have the resources to offer help
If you want to set your team up for success with stretch goals, be prepared to invest in them. Remember, achieving stretch goals is rarely about simply trying harder. Maybe your team needs additional training, more of your mentoring time, upgraded software, or the freedom and space to do some creative brainstorming. You don’t have to figure it out all on your own. Discuss the goal with your team and ask for their feedback on the missing resources that could unlock the problem. Then make sure to follow through and give them what they need.
If you’re leading a startup team, be careful how you implement stretch goals. Your lack of data and resources, and the unique nature of most projects, can make stretch goals a risk to team morale and culture when overused.
Used judiciously, however, stretch goals can be a powerful way to create bold new visions, creative solutions, and leverage the positive momentum in your business.
What are your biggest successes with stretch goals? Failures? Please drop me a note below with your thoughts!