Bankers and investors want to know how things will turn out with a high degree of certainty in order to manage downside risk. Consequently, organizations that take professional money learn to conservatively state what they will accomplish to have a high probability of achieving plan ith intelligent goal setting. When actual results exceed plan there is cause for celebration as suggested by the under-promise and over-deliver lines graphed in Figure-1.
Conservative goals, however, do not generally inspire teams to achieve their full potential. Aggressive but achievable goals, that may be met only 75-80% of the time, are much more likely to stimulate top performance. Even when actual results come in under plan the organization is often still much better off than had it planned conservatively, as suggested by the aim-high and do-better lines added to the graph in Figure-2.
Leaders of growing businesses are wise to set, and manage operating teams to, aggressive but achievable goals that stimulate top performance leaving more conservative plans and intelligent goal setting for board room presentations to bankers and investors.