Wednesday, May 22, 2013

About targets

Target setting is always tricky business. Set them too low and you risk mediocrity. Set them too high and you risk breakdown.

Making matters worse, 'high' and 'low' are often subjective and never a sure thing. One man's low is another man's high, and one man's high is another man's madness.

In my experience, targets fall into four categories:
  • Safety-first targets: Your normal run-of-the-mill everyday targets, often based on past trends and reasonable assumptions.
  • Stretch goals: Set to make sure people don't get too comfy and to shake them out of their comfort zones. Basically you start with a safety target and then stretch it by 10 percent or so. These targets are still mostly inward looking. You decide what you are capable of, then add a 10 % margin to account for errors. 
  •  BHAGs: Big Hair Audacious goals - a term coined and popularised by Jim Collins are supposed to be once-in-a-lifetime bet-the-company kind of shots. These are different from stretch goals in two important ways: First, these are not based entirely on historical trends because the entire point is to break away from the past. Second, these are not inward looking. They don't focus just on what the company is capable of, but also on what its circumstances demand - either a threat or an opportunity.
  • Delusional and / or visionary: Beyond BHAGs we get into unchartered territory. Often based on delusions about the company and its environment, delusional targets ride on a wing and a prayer. In rare cases they can come off - in which case they are called visionary and the results can be spectacular.
When you are in the safety-first zone, the natural desire is to move down the list and become more ambitious. But like a piece of elastic that can be stretched to breaking point, moving too far down the list risks delusions.

The rub of course is that the boundaries between these four are never clear before the fact and often blurred after the fact. The deeper down the list you go the more the risk of slipping into delusional territory.

Leadership is the art of staying in the stretch / BHAG zone, with occasional forays into visionary -  without becoming delusional.

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