The Worst and Most Common IC Plan Designs
#4 - The Stretch Goal
Throughout The Marketing Advantage’s (TMA) 35 years of developing, evaluating, and innovating sales incentive compensation plans for pharmaceutical, biotech, and medical device companies, TMA has encountered many poorly designed compensation plans. Here we will discuss one of four plan designs that fail to motivate the sales force and ultimately lead to declined sales—The Stretch Goal.
The Stretch Goal
A stretch goal is a target set higher than what is realistically expected to be achieved, with the belief that aiming for a more ambitious goal increases the likelihood of success. While this concept has gained popularity, it lacks solid grounding in sales compensation theory and in practical application. As discussed in the article "The Stretch Goal Paradox" by Sim B. Sitkin, C. Chet Miller, and Kelly E. Harvard (Harvard Business Review, Jan-Feb 2017), stretch goals can often lead to counterproductive outcomes.
Unfortunately, many executives have adopted this concept and have set national goals that are artificially inflated by 5% or more. Based on The Marketing Advantage's experience, we have never seen a stretch goal lead to greater success. In fact, the opposite often occurs. When a sales force recognizes that the goals are unrealistic, they become demotivated and disengaged frequently leading to poor sales results. As a result, the financial performance typically falls short of what could have been accomplished with more realistic and attainable objectives.
What’s even more damaging is when the deception behind inflated goals becomes apparent. We’ve witnessed a VP of Sales announce the national goal (the stretch goal) at a national sales meeting, only to be followed by the CEO indicating that the actual sales target is lower. Sales teams often see this as a manipulative tactic, leading to feelings of betrayal. This erodes trust in the fairness of the compensation plan—and in the company itself. Such actions can have lasting negative effects that damage morale and the company’s culture in the long term.
Conclusion
Realistic and attainable goals are crucial for maintaining sales force motivation and trust. Inflated stretch goals can have detrimental effects on both morale and financial performance, ultimately harming the company's culture and long-term success. In the next blog, we will discuss the third most common and poorly designed IC plan.
