Stretch vs cautious targets

RAG table

As rule of thumb, for most systems, there is nearly always 30% improvement to be foreseeably gained, under ideal perfect conditions. And, if the 30% where to be realised then there is nearly always a further 30% improvement to be found in the remainder and so on. The trouble is that we rarely operate under ideal conditions and with perfect foresight. There are invariably constraints on us, which make it practically impossible to straightforwardly see and reach the available 30%. Although some of these constraints may be deemed to be outside our control, most tend in fact to be more within our control that we immediately thinks – if we just we are brave enough to accept the fact.

The setting of targets is influenced by human behavioural factors. Chiefly the fear of failure. Depending on the organisation’s tolerance of failures, those responsible and accountable for performance can select either a cautious or a stretch approach to setting targets. A management system controlled by a blame and shame culture will naturally foster the cautious approach, because people would want to avoid failure at any cost.

By contrast, a management system operating the stretch approach will show tolerance of, admissible, shortfalls in meeting the higher targets. Those accountable for the targets should learn to assume and factor for the outcome likely being lower than the expectations – without apportioning blame. In the example scenario below, setting an ambitious target of 12% and ‘only’ achieving 8% is still twice as good as setting a target of 3% and then ‘over-achieve’ by reaching 4%. It is false to think that over-achieving a cautious target equates to high performance.

Exceeding an easy target is not a cause for celebration, but ‘failing’ a stretch target can easily be celebrated.

Stretch vs cautious targets

Although the stretch approach tends to produce better results, it can unfairly reduce people’s sense of success. Shaming people for not reaching a stretch target will result in a drift towards the cautious approach in future targets setting, and an overall reduction in outcomes can follow. It is therefore important to put the relative ‘underachievement’ against a stretch target into perspective, and to highlight and celebrate the positives in the result. There is no shame in not meeting a stretch target. There is only shame in not having tried to stretch in the first place.

The worst scenarios – and I have come across organisations working in this way – is when a team sets an easy target and then deliberately temper its output to make sure that it does not to exceed this easy target by too much. It gives them a perceived comfort of having some output in hand, to buffer against a future potential ‘failure’ when next asked to raise the target. This is a system that will never succeed in reaching its true potential and become high performing.

If your organisation use a RAG (Red, Amber, Green) rating system for tracking targets, then you should be suspicious of a target that shows Green from the outset. It is somewhat pointless setting a target for a system that is assumed not to be in need of improvement. If we believe that our system is impeccable, then we are probably not being ambitious enough. Setting easy achievable targets can be a destructive approach in a competitive market. I advocate always setting targets that show Amber at the outset – because this will drive the process owner to advance the system. When the target has turned Green, then it may be time to review and revise the expectations – to turn it back to Amber again. Setting targets that are deep Red can be demoralising. If you do this, then make they come with a sliding scale of reward, where even a partial achievement can be celebrated as success. Goals that are Red tell that your planning was either unrealistically ambitious or that it has inadequately identified the correct sources of what you want.