“We’re looking to grow revenue by 15% a year for the next three years.”
“Our revenue target for 2015 is $100 million.”
I hear these kinds of goals from clients all the time. They're typically looking for us to create a marketing strategy that will help them hit their revenue targets, or they want us to identify an attractive target market that is big enough for them to make their numbers.
The stretch goal is alive and well in Canadian B2B companies – but this is a problem. This post from the Harvard Business Review blog, titled “The Folly of Stretch Goals”, points out their downsides: they can be demotivating, lead to unethical behaviour, and drive excessive risk taking. For companies with goals that must be met at all costs, these downsides are a reality. But in some companies, the goals may get lip service when, realistically, nobody expects to meet them. They become a ton of head office PR, undermining the rest of the messages from leadership.
Stretch goals become problems for our clients when the revenue target prevents them from considering alternatives. It may cause smarter growth to slow. It may cause an increase in revenue by sacrificing profitability or long-term client value. Possibly the revenue goal is flat-out unattainable given the dynamics of a market. If the buying cycle is two years long, doubling sales in a year is unlikely. If you're focused on an unrealistic revenue target, you may never invest in the long-buying-cycle clients that you may be ideally suited to serve. And that’s just an example of the way stretch goals can warp strategy.
How can companies address the downsides of stretch goals? Here are some tips:
- Be honest about the purpose of the goal and clear-eyed about the outcomes. If your organization sets stretch goals just to talk about them and without consequences for failing, nobody will pay attention to them.
- If there are drastic consequences for not meeting stretch goals, consider examples like Enron and think about the company culture you’re building.
- Don’t confuse large goals with stretch goals. If you’re in a startup phase, doubling your revenue every quarter might be conservative. You need to develop a track record to really know if a goal is a stretch.
- If you want to set achievable goals grounded in the realities of the business, it requires research and analysis to understand the marketplace deeply, both from internal and external perspectives.
If you're interested in discussing ways to get more concrete and realistic about your goal-setting based on insights into buyers, competitors, complementors, or other players in your marketplace, we’d be happy to help.