Jack Welch was quoted as saying, “By reaching for what appears to be the impossible, we often actually do the impossible. And even when we do not quite make it, we inevitably wind up doing much better than we would have done.”
Stretch goals by definition are goals that you don’t know how to reach, i.e., goals that are difficult and seem impossible. These are not modest improvements that limit employees thinking to minor alterations, but specifying levels of performance that are wildly beyond what is currently being achieved today. This requires employees to “think outside the box” and results in improved performance that is magnitudes beyond what they thought were possible.
Stretch goals have two primary purposes: to improve organizational effectiveness and for personal growth and professional development. An example related to improving organizational effectiveness might be to reduce rework by 20%. The CEO may decide to stretch this goal to 30% to challenge his employees. This has been the traditional approach to setting goals and objectives. But what if the CEO said he wanted a 90% reduction in rework. Everyone would say that it’s impossible, it can’t be done, he’s crazy, etc. Using the right techniques, tools, and a change in how you think about rework would get you closer to 90% than you can imagine. Several years ago I worked with an Asian client whose changeover times in their stamping operation averaged 90 minutes. They thought I was crazy when I told them we could get them under 10 minutes, but in just two short months they were averaging 15 minutes per changeover and now understood that less than 10 minutes was achievable.
Stretch goals can also be used for personal growth and professional development. Organizations need more employees that are willing to try new ideas and learn new techniques. When they can truly achieve outstanding results, employees become an asset to the organization and are rewarded for their efforts. The department manager at the Asian client in the example above was promoted to operations director in less than a year.
In his book, “The Lean Turnaround,” Art Byrne in his years at Wiremold accomplished the following results using basic lean tools and techniques:
- Lead time dropped from 4 to 6 weeks to 1 to 2 days.
- Productivity improved by 162%.
- Gross profit improved from 38% to 51%.
- Machine changeovers went from 3 per week to 20 to 30 per day.
- Inventory turns improved from 3 times to 18 times.
- Customer service improved from 50% to 98%.
- Sales grew from $100 million to $400 million.
- EBITDA margin improved from 6.2% to 20.8%
- Working capital/sales fell from 21.8% to 6.7%.
- Operating income improved 13.4%.
- Enterprise value increased from $30 million to $770 million.
His team could not have achieved these results without using stretch goals and challenging them to “think outside the box.” Business transformation is essential for success and survival and it all starts with a daring goal. When used correctly, stretch goals are an essential component of any innovative culture.