Business leaders are encouraged to “set stretch goals” and to “set the bar high”. Most often that is very good advice. Why? Individuals, teams and organizations may not fully realize their potential without a compelling goal. Similarly, new products and services, new delivery methods and creative responses to emerging markets may never be explored without the challenge created by seemingly unattainable goals.

Stretch Goals at Volkswagen

Recent events at Volkswagen remind us that leaders should balance the impulse to set stretch goals with an assessment of the possibility that they may be putting events in motion that can lead to unintended consequences. We have already written about the VW scandal, the damage to the VW brand and the potential financial penalties. But that was early on in the case and we could only speculate about the impact of the scandal. And we had no idea what caused it.

Now, a fuller picture of the VW scandal is emerging. First there is the portrayal of the scandal as a “series of failures.” And then a portrayal of the failures at the very top of the business. How could such a thing happen? Who authorized the use of software to avoid emissions control testing? The answer to that question is – no one. No one consciously placed the company at such risk. So how did this happen?

What Went Wrong

In order to answer that question, let’s look at three references which are not often joined:

1. “Make no small plans. They have no power to stir men’s blood.”

This is the argument in favor of setting stretch goals. The original injunction to “Go big or go home.” The great Chicago architect and civic leader Daniel Burnham had a vision for Chicago after the fire of 1871. One could say that The Plan for Chicago, which he co-authored, was a stretch goal. His vision was bold and may have seemed unattainable, but he persisted and many of Chicago’s greatest resources, its lakefront to name one, are attributed to Burnham’s vision. “Make no small plans. They have no power to stir men’s blood.” Good advice.

But is that always good advice? Generally, yes, but that good advice, as we’ve seen, can sometimes generate unintended consequences. So to that time-tested advice we should attach an asterisk, which was articulated a long time ago, in 1298 CE!

2. Nemo potest ad impossibilem obligatur.

In 1298 CE Pope Boniface VIII laid out eighty-eight legal principles. One of the principles–Nemo potest ad impossibilem obligatur–means “one cannot be obligated to do the impossible.”

Insisting that others do the impossible can lead to injury – physical, mental, ethical and, in VW’s case, financial. Consequently, leaders should set stretch goals with care lest they incent behavior that could lead to injury. Fast forward from 1298 CE to 2015-16 CE and the fallout from the Volkswagen vehicle emissions scandal.

3. VW will pay $14.7 billion dollars over the carmaker’s vehicle emissions scandal.

Last week, US District Judge Charles Breyer approved a settlement requiring VW to pay $14.7 billion dollars to address the damage done by their misconduct (and this settlement is probably not the only settlement VW will pay out).

So, who’s at fault? Early on there was talk of the scandal being due to a handful of “rogue programmers”.  They may have been the proximate cause. Someone did write the illegal software.

But upstream, senior management was committed to a particular diesel engine and stayed with it even in the face of evidence that the engine could not achieve the required emission standards.  In so doing, management set a goal which was impossible– at least given the resources at hand and the time line which was set. Nevertheless, they insisted the emissions goals be achieved. The programmers and engineers could not get it done … legally. They were told it had to be done, so they built software to trick the emissions control testing.

The leadership lesson here is a harsh one and it comes with a monstrously large price tag.

  • Set challenging goals but be certain your people have the resources and time needed to succeed.
  • Push back on claims the goals are unattainable but be careful to avoid signaling your people that they may use any means necessary.