When setting a stretch goal, use the two-thirds, one-third method. For the gap between commit and stretch, you and your team should have a good sense for how you might close two-thirds of that gap and have no idea at all where the other one-third would come from. Why one-third? More than one-third and people give up. Less than one-third and it's too easy and doesn't generate breakthrough ideas and performance. The additional one-third becomes the "go get."
A lot of times I get asked, how can I set a good stretch goal? I like to tell people to use the one-third, two-thirds rule. For the gap between your commit and your stretch, your team should have a good sense for how they might close two-thirds of that gap. And no idea for where the other one-third will come from. Why two-thirds, one-third? Well if it's more than a third that they don't know where it's going to come from, they're going to give up and just say, "This is too hard.
"I don't have any ideas." If it's less than one third, it may be too easy, and they might coast. The way to create this list, and understand what this one-third, two-thirds is, is gather a list from your team for ideas beyond the commit and add them up. Let me walk through an example. Let's say we set a commit goal of x, and now we're trying to find out what the stretch is. I ask the team, "I need all your best ideas for "how we're going to drive revenue beyond that commit of x." The team goes off.
They come back with their ideas. And they come up with $2,000,000 worth of ideas. Now these will be hard, but they have a reasonable idea of how they can capture $2,000,000. That two million is my two-thirds. What I need to do is then add another third beyond that. When you look at the math of it, you just divide that two million in half and add it. So I would add another $1,000,000 and then I have a total stretch goal of three million.
Now, let's look at that one-third, two-thirds. Two-thirds of that, $2,000,000, they have ideas. One-third of it, $1,000,000, they don't know where it's going to come from. They're going to have to innovate to find that incremental $1,000,000. When you set your stretch goals, following this two-thirds, one-third rule will you help you identify ideas and make that stretch feel like it's something they can get, but it will still push them beyond the ideas they've already got, and hopefully drive incremental innovation.
When you set your stretch goals, make sure you get their input and their estimates, and then push them beyond that with an extra one-third.
Along with providing guidance on how to link individual employee goals to organizational strategy, Mike walks you through the different types of goals, including bottom-up, zero-based, commit, and stretch goals. He also helps you use goals to change behaviors, build new skills among employees, and make goals actionable by using incentives and tying them to specific activities. He concludes with a comprehensive plan for setting and implementing goals, and some tips on dealing with challenges such as conflicting goals.
- Identifying goals and goal types
- Setting SMART goals
- Linking goals to business strategy
- Building goals from the bottom up or top down
- Creating stretch goals
- Outlining activities and resources to help employees achieve goals
- Reviewing and revising goals
- Reconciling conflicting goals