Sunday, August 24, 2008

"Stretch"

The leadership of General Electric introduced the management concept of "stretch" in the 1990s. The idea was not just to create extraordinary goals higher than those thought achievable for the coming year. It was to set outlandish, almost unthinkable goals that business groups might achieve in the longer-run. For example, instead of striving for an inventory turnover (sales to inventory) ratio of 4.5 instead of 4 in the coming year, a stretch goal would be a turnover of 10 in five years, with improvements toward that goal recognized and rewarded on a year-to-year basis. One goal of this philosophy was to eliminate the time-wasting annual budgeting game in which middle managers would argue for 4, top management would argue for 5, and they would both know in advance that they were going to end up with a goal of 4.5.




Click here for the rest of the Harvard Business School's Working Knowledge article.

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