The Folly of Stretch Goals


I just finished listening to the terrific Planet Money podcast on the Wells Fargo fiasco. You probably already know the big picture of how the bank illegally and unethically opened accounts for customers. But this episode brings the fraud down to a human scale by interviewing some of the Wells Fargo employees. While John Stumpf was lauded in the business press for his "8 is Great" mantra (that's eight accounts per customer), this goal created what employees called a "boiler room" culture and a "grindhouse."

Of course, W. Edwards Deming fulminated against the absurdity of arbitrary numerical goals. Point #11 of his obligations for management states: "Eliminate numerical goals, numerical quotas and management by objectives."

Back in 2012, I wrote an article for the Harvard Business Review on The Folly of Stretch Goals -- and really, what is Stumpf's "8 is Great" but a stretch goal? I argued that stretch goals can be demotivating, can cause excessive risk-taking, and can lead to unethical behavior. I cite Sears as an example. . . and now you can add Wells Fargo to the list.

In Profit Beyond Measure, Thomas Johnson wrote:

"That happens a lot, we honestly translate aims to goals. And then we do stupid things in the name of the goal get it the way of the aim. We forget the aim sometimes and put the goal in its place."

I'm no oracle, and I'm certainly no Deming. But I do know that the evidence is pretty clear that when you set arbitrary stretch goals, you're taking a bet that may very well end up with you testifying before Congress.

 

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