Setting Stretch Goals in BusinessChia-Li Chien, Ph.D., CFP®, PMP®, CPBC
Chia-Li Chien | Dec. 14, 2012
“You are in charge!” TC and I said to my daughter Con-Ning back in the spring of 2012. We put her in charge of the universities that she wanted to tour during spring break. She wants to be a veterinarian and there are only twenty-eight veterinary schools in the U.S. Con-Ning was advised during her veterinary hospital internship program to attend an undergraduate school that has a veterinary school. So, she narrowed down her choices and decided to tour four different universities on spring break.
Two days prior to our departure, she got some really bad news about her SAT results. Her scores were nowhere near her number one choice’s cut-off. So, she decided not to tour that campus. Somewhat exasperated, I told Con-Ning, “NO! You may be inspired by that school campus!”
Still, she was very hesitant to tour that one. But we scheduled the tour and went on our way. The day of our tour, of course, we were running late due to traffic and TC had a very difficult time finding a parking space. As you can imagine, Con-Ning wanted to give up. However, after the tour, this particular university became her number one choice of undergraduate programs and inspired her to retake SAT later in the year.
Con-Ning has always been very good about sticking to a timeline. I asked her to prepare her admission application essay by end of August and have it edited by the first week of September so that she could apply to all eight universities as early deciding factors. She submitted all her applications by the end of September. Her second SAT score was still not good enough for her highest school aspirations. But they still represented her stretch goals.
By the end of October, she was asked to interview by an Ivy League university that ranks number one in veterinary schools. I drove her there without actually realizing it was an interview. And then, after the interview, I mistakenly thought parents could ask questions. We both left thinking that I might have blown the interview for Con-Ning. Sigh. What’s a mother to do?
At this point, Con-Ning knew that she really did not have much of a chance for getting into her number one school choice. But she kept thinking that the second Ivy League choice could very well be a great place to study veterinary science if she got accepted. Again, it’s very competitive.
Right before Thanksgiving, she got a call for an interview from her number one choice, which is also an Ivy League university. Con-Ning found on that university’s website that only 50% of the applicants are called to interview. Drawing from her previous interview experience, she was much more prepared this time. (Oh, by the way, I was stopped right by the door with “we only conduct interviews with the student. Parents are welcome to wait in the lobby!”)
Before I knew it, the ninety minutes had gone by and she came out with a big smile along with the interviewer. He and I chatted a bit about the statics of the applicants in Charlotte area before we concluded the visit.
On our way home, I told Con-Ning repeatedly, “I am so very proud of your accomplishments!” You see, the two interviews had been a great experience for Con-Ning regardless of their decisions. We know it’s very competitive to get into these top universities, but it’s also a great opportunity for someone like Con-Ning, whose SAT score was not ideal or competitive.
The good news was that two out of the eight universities to which she applied had already accepted her. Con-Ning felt good about one in particular if she was not accepted by either of the two Ivy League schools.
In the private business world, setting baseline goals to goals that force you to stretch might be new to many entrepreneurs. How an entrepreneur executes and follows through the plan is another story.
What I learned from Con-Ning’s experience is that your stretch goals can be as high as you want them to be. The process of executing and following through the plan is far more important.
Here are three categories I often suggest for entrepreneurs setting their goals for the year:
• Baseline—based on current year revenue and net profit structure.
• Goal— add a desirable growth percentage from the baseline to create a goal for following year. For example, one of my clients has been consistently growing 15% on average annually. Therefore, they set a 20% growth rate as a goal.
• Stretch Goal—add a stretch growth percentage from the set goal. For example, what if the business could grow additional 5% from the set goal?
You then take these goals to setup “pay for performance” in your strategy plan. Your team will move toward these goals for you. It’s a win-win situation for both the team and entrepreneurs/owners.
It’s not just the revenue goal you set—you also should put your net profit into the goal. For example, one client set up the net profit goal as follows:
• Baseline —net profit is 5% of the revenue
• Goal—net profit is 6% of the revenue
• Stretch Goal—net profit is 7% of the revenue
The Key Performance Indicators (KPIs) then are set during a strategy session to monitor the health of the business throughout the year.
In a few weeks Con-Ning will find out if she reached her stretch goal, goal or baseline. Con-Ning’s journey of becoming a veterinary will cover a long period of time. It’s a long-term plan despite the fact that everyone tells her “you might change your mind during your undergrad years.” How she manages the challenges of her journey will make a significant difference in the end results.
It’s no different in private business. Give yourself permission to achieve your baseline, goal, and stretch goal. “You just don’t know if you don’t try!” I hope that Con-Ning—and you—now realize that just because she tried, she put herself in a better position for the future.