We’ve all heard the adage, “you can’t manage what you don’t measure”. Although we believe there’s much more to leading successful teams, this statement has validity. Therefore, in the OKR methodology, we’re critical about setting measurable targets. These measurable targets are the Key Results – the stretch goals that we work towards.
If you’ve worked with OKRs for any time, you would know that the generally accepted practice is to set goals such that teams can realistically achieve 70% of them. Of course, we might hit 100%, and that’s indeed what we aim for, but to get there, we’d need some luck on our side. So, where does the 70% come from? Why set stretch goals? In this article, we’ve outlined why setting stretch goals is essential and, secondly, why we need to measure performance against these stretch goals.
Why do we set stretch goals?
Growth requires strain. If you want to build muscle, you need to work against resistance. If you’re going to improve neural pathways, you need to solve complex problems. In the same way, if you want to execute more effectively in teams, you need a goal that will stretch your abilities as an organisation.
Stretch goals are required to create a strain that makes growth possible. Setting ambitious goals are also needed to release adrenaline. Think about the last time you set out to achieve something significant – you might have felt your heart beating faster or your palms sweating. That’s adrenaline talking. Adrenaline is an “action” drug – it’s literally what our bodies need to start moving (read more about the neuroscience behind goals here). When teams work on setting stretch goals together, everyone gets a minor hit of adrenaline. They start moving, and they have emotionally bought into the purpose they are moving towards.
The shadow side of stretch goals
One element of growth that we need to talk about is business growth. But an equally important consideration is growing our people. In today’s businesses, we’re often more concerned about the business’ growth than the employees’ growth. If we pursue goals at the cost of the people, it creates a fear-based culture. This growth model is not sustainable over the long term because it creates a culture where fear reigns and people don’t stay in this culture and give to the organisation willingly.
We see here then that stretch goals have a shadow side; if goals are set too high, you will end up with one of three things, depending on your culture:
- A burnt-out workforce who are endlessly working in pursuit of the goals
- A scared workforce who know that goals need to be met at all costs
- A despondent workforce who can’t seem to hit the mark irrespective of how hard they work
On the other hand, if goals are set too low, again, you might end up with a few things:
- A disengaged workforce who see no value in the goals being set – the bar is so low you might as well not have one
- A drained workforce who are bogged down by the onus of setting goals that don’t change behaviour or direction of a team
- A stagnant workforce who are not growing because they are not being stretched
Finding the right ratio
So we talk about the Goldilocks ratio of stretch goals – they need to be juuuuust right. And that “just right” is where around 70% of them are achieved consistently over time – enough chance of achievement to release adrenaline and make you stretch, but without setting such lofty ambitions and causing despondency in the team.
And what if someone fails? If they misjudge what you can achieve and grossly underperform on the 70% “target”? It’s a leader’s job to make it safe for employees to take risks. Sometimes they will fail in their pursuit of the target – that is okay. It’s not a failure; it’s just learning.
“Failure is the manifestation of learning.”
Why do we need to measure stretch goals?
Setting goals is one thing – measuring goals is quite another. Most people I know set some goals each year – often in the form of new year’s resolutions. Very few of those people deliberately call those goals up again at the end of the year to measure their performance against them. We see the same in companies – most companies do some sort of annual strategic planning. Those companies seldom measure performance at year-end against the goals set at the start of the year.
Why is measuring so important? Within organisations, we often measure performance to reward against that performance. However, as soon as you reward against goals that are supposed to be stretch goals, those goals will be less “stretchy” and more “safe”.
Measurement shouldn’t primarily be done for rewards. There’s a host of other reasons why it’s essential.
- Optimising performance
The dominant reason we keep score is to get better. For example, the score is essential for a sports team to track performance. They can then use their performance statistics to learn what to do differently in different scenarios. In short, measurement begets improvement.
- Changing course
This is slightly different to optimising performance. Optimisation is when something is working well already, but sometimes significant failures and gross underperformance call for a course change. See this as a learning opportunity rather than a failure. But you won’t know that you’ve “failed” if you don’t measure your performance.
- Celebrating successes
Similar to leveraging failures as learning opportunities, we should leverage great performance as opportunities for celebration. Recognising individuals and teams who have gone above and beyond forms part of a culture of accountability. It lets employees know that their contributions are being seen. Note that recognition and reward are different but can co-exist.
- Creating competition
We can see competition negatively, but in a healthy culture, it will increase performance standards throughout. For example, a player’s game gets better when they play against a slightly stronger opponent. But this is only possible when we have something to measure against, some way to compare our performance.
- Engaging emotions
Finally, setting up measures creates the opportunity to engage emotions. This happens when we set up stretch goals, and we get excited about what may be possible. Or when we achieve those stretch goals and we celebrate together. Or when we don’t achieve them and we learn together. All of these elements increase engagement in the team.
Unlocking the Goldilocks ratio
Goals need to be just right – not too hard and not too easy. As we’ve explored, this is where on average, 70% of the goals are achieved. It’s a challenge to know where this ratio sits for any team – invariably, they will go through seasons of overstretching and sessions of sandbagging. As long as, over time, the team understands their capacity and capability to perform and that they get closer and closer to this Goldilocks ratio.
What’s the starting point to unlocking the Goldilocks ratio?
Only through performance evaluation will you find the balance between stretching enough to release adrenaline, but not too much to create underperformance and cause despondence.
The Gates Foundation provides a world-class instance of exemplary evaluation criteria. They painstakingly set out their evaluation methodologies in public papers, articles and documents to create clarity and accountability. Here are their words:
“Evaluation is best used to answer questions about what actions work best to achieve outcomes, how and why they are or are not achieved, what the unintended consequences have been, and what needs to be adjusted to improve execution. When done well, evaluation is a powerful tool to inform foundation and partner decision making about how to optimise scarce resources for maximum impact.”
Implementing measurements and evaluation criteria in your business can be scary. It can lead to a fear-based culture where employees become hesitant to put anything on the line because they might be exposed if they fail. However, there’s a big difference between adrenaline and fear – fear causes adrenal release as well, but when you operate out of a place of fear, you’ve gone too far. Measures need to be implemented to optimise performance, to improve the people and the organisation, and to introduce healthy competition.
- Bill & Melida Gates Foundation, 2021, October 2021, Evaluation Policy
- Paul Barker, OKR.co.za, 2021, October 2021, The neuroscience behind OKRs