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A Strategic Goals Paradox

Aim strategic goals high but avoid ‘stretch goals’ unless the conditions are right



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Occasionally the ‘hail Mary pass’ wins the game. Once a President’s ‘moon shot’ turned a nation’s fortunes and a few firms like Amazon and Apple who risked it all won big. In business, aiming for seemingly impossible targets can sometimes work but stretching too far at the wrong time can be disastrous.

What's more, according to Professor Sim Sitkin at Duke University's Fuqua School of Business, the firms most likely to take on a ‘stretch goal’ are the least equipped to succeed, while the best-placed companies tend to sit on the sidelines.

"If you have recent success and adequate resources, that's the time you should try for these really radical innovations," Sitkin said. "If you're coming off a recent failure and you're choosing to go for broke because, well, why not, that's exactly the time you should not go for stretch goals."

In this 12 minute video Professor Sitkin explains: 

  • Why stretch goals are widely used, but rarely understood
  • How to assess whether your organization is a good candidate for using stretch goals
  • Why organizations that should use stretch goals don’t and those that do shouldn’t
  • About strategically effective alternatives for organizations that should not use stretch goals

Business mythology encourages the popularity of stretch goals. Unfortunately, rather than leading to big success most fail and too often organizations fail to realize when to reach for the stars and when to hold off.

Sitkin found the best time for firms to pursue a stretch goal is when they are flush with resources and fresh from a recent success. But those firms, he said, rarely tend to do so. "They sit back, they become risk averse, and they become very conservative." 

He says struggling companies should still set lofty goals, but suggests they pursue small wins, to build resources and confidence, and test innovative strategies by undertaking experiments that can only result in small losses.

"The key here is if you do a proper analysis and really understand your situation, you can pursue stretch goals in a smart way" says Sitkin.


Whether you're a new manager just starting out or a CEO expanding globally, Duke Executive Education has a program to help you lead.





 
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