Too many businesses chase grand visions that sound great on stage but fall apart in execution. Namely, there are two competing schools of thought when it comes to how to set goals for your business. There is what I advocate, and what is advocated by tried and true systems for running SMBs such as EOS, which is to set realistic “SMART” goals for your company. The other school of thought is the “BHAG,” or “big, hairy, audacious goal.” In today’s article, we’re going to talk about why BHAGs are nothing more than motivational speech fodder for professional speakers and overpriced “coaches,” while SMART goals will keep you on track for success.
What is a BHAG?
It’s generally pronounced “bee-hag,” and it’s an acronym for “Big Hairy Audacious Goal,” or for the more vulgarily-inclined, “Big Hairy-Ass Goal.” The idea originated with writers Jim Collins and Jerry Porras in their book “Built to Last.” You’ll notice I referred to them as writers, because that’s what they are. They’ve never run an actual business in their lives. Jim Collins calls himself an “independent researcher.” You know, the same thing that conspiracy theorists on TikTok call themselves when they think the moon landing was faked. Jerry Porras is a little more credible, as he’s been a long-time professor and academic researcher at Stanford’s Graduate School of Business, but nevertheless, he has still never run an actual business in his life. Yet, for some reason, businesspeople hang on the every word of these guys. I’m here to encourage you to stop. Not to stop reading them, as there is almost always some value in reading different perspectives, but to stop taking it as gospel and running with it.
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Now, that all said, I will give the writers some credit that their book isn’t as crazy as many business people are when they misapply the principles in it. When you read through what Collins and Porras consider to be BHAGs, they actually aren’t totally unrealistic goals. There is, after all, a difference between audacity and insanity. Audacity is more about being bold, and it doesn’t involve ignoring the realities of business. So common examples of their style of BHAGs would be NASA’s goal to put a man on the moon in the 60s, or Tesla’s goal to get us to a world of sustainable energy. While these goals were certainly audacious, they weren’t crazy and unrealistic.
Unfortunately, many businesspeople, frequently not from reading the book, but instead from listening to some shyster professional speaker who perverts the message of the book, think that BHAGs are supposed to be absolutely crazy and practically out of line with objective reality. More than anything, I want you to get rid of the idea that you need that sort of goal in your business. But aside from that main goal, I also want you to rethink even using BHAGs at all, even as defined by the original authors, and instead focus on “SMART” goals.
What is a SMART goal?
Like BHAG, SMART is an acronym, in this case for “Specific, Measurable, Achievable, Relevant, & Time-Bound.” Let’s look at each of these elements:
Specific - the goal must be clear and unambiguous so that everyone can easily understand whether it is achieved or not
Measurable - the goal must be specifically quantifiable; it can’t be subjective
Achievable - the goal must be realistic
Relevant - the goal must align with your overall mission statement and your longer-term goals
Time-bound - the goal must include a deadline
So, let’s look at what a SMART goal would actually be in practice. Something like this: “Reduce client churn to 15% by the end of the calendar year using the NARPM Accounting Standard definition of churn.”
There are several reasons why using SMART goals is so important, but the main reason is that they bring clarity to your entire team so that they can focus on execution. BHAGs bring no clarity. This is the primary criticism of them as originally envisioned by Collins & Porras. BHAGs are big and aspirational, meant to inspire people, but they do not bring true clarity and do not allow for focus like SMART goals do.
The Lure of BHAGs
Like most bad ideas in business, the BHAG really became popular among the TechBro culture of startups. They latched onto this idea and took it to absolute extremes, and it’s easy to see why, especially in their environment where “fake it till you make it” is generally the name of the game.
BHAGs are appealing to emotions, not intellect. They fire up ambition and get the non-operations employees in the business energized. Salespeople love BHAGs, for example. Accountants, on the other hand, roll their eyes, and operations managers put their fists through a wall. So visionary style leaders love BHAGs because they appeal to the emotions of the most emotional people in the business, who are also the most extroverted, who then go around pushing the BHAG mantra nonstop. When you’re in a startup mindset and odds of success are sub-10%, visionaries love this, because it keeps the rats from fleeing the sinking ship.
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BHAGs are also “sexier.” Nobody gets a profile in Inc Magazine for talking about how they’re going to increase sales by 25% this quarter, but they sure will if they’ve got a BHAG of “completely reinventing how modern medicine fights cancer.” Never mind that the second example doesn’t actually say anything meaningful, it’s sexy in a snippet! If you want to see the classic example of a BHAG being used in this way, look no further than the tragedy of Theranos. “Revolutionize blood testing and democratize healthcare” sure sounds sexy in a Forbes profile of a young new billionaire, but there’s that whole problem that it doesn’t actually say anything real.
BHAGs are also all about fueling visionary ego. Being an operator is boring, but being a visionary is exciting! Business leaders who tend to be more out on the narcissist end of the spectrum are going to absolutely adore a good BHAG, because it fuels their delusions of grandeur. They don’t want to be a CEO, they want to be a “visionary.” Their egos are out of control, and they think they can change the world. Now, this sometimes works for people. Steve Jobs is the quintessential example of this. His biographer, Walter Isaacson, popularized the term “reality distortion field,” which was originally coined by a software engineer at Apple back in the 80s to describe how Jobs would come up with these absolutely insane goals and then force everyone to make them reality. Today, with the benefit of five decades of hindsight, we see this as having been a massive success. But that tends to overlook how Jobs created the failure of all failures in the Apple Lisa, got kicked out of his own failing company shortly after, then started NeXT Computer which also failed commercially (albeit while doing great things technologically), and almost failed with Pixar as a hardware business before pivoting to an animation partnership with Disney. Jobs set a whole lot of BHAGs, and while some of them late in his career turned out incredibly like the iPod and iPhone, a whole lot also were massive failures that likely set back Apple by many years and created two decades of Microsoft and PC dominance. It took a lot of maturing and experience before Jobs finally figured out how to actually run Apple successfully when he finally came back. Maybe you have decades of trial and error to figure out why your BHAGs aren’t working, but most of us don’t have that luxury.
Finally, BHAGs are also popular because they fuel recruitment and PR. Basically, they draw big attention, which makes it a lot easier to bring in applications and media attention. Of course, then you have to actually deliver, or employee turnover will skyrocket and media attention will turn negative. But nobody thinks about that part until it’s too late.
It’s easy to see why BHAGs can be alluring, especially if your personality is more geared towards being a visionary instead of an operator. But I would encourage you to really meditate on this and think about whether that BHAG is really being set because it’s best for the business and will deliver the best results for all stakeholders, or if it’s more about appealing to your ego and your personality faults.
Why BHAGs are Flawed
In this section, I’m going to give BHAGs the benefit of the doubt and talk about them in the traditional Collins & Porras mold instead of the perverted Silicon Valley way, because even when steel-manned, BHAGs are deeply flawed, and they only get worse with the influence of motivational gurus and Bay Area voodoo.
BHAGs lack clarity. Not all of them, but most of them. For example, one company I know set a BHAG of growing to 25,000 doors in 10 years. Now, that’s certainly audacious, but it doesn’t lack clarity. I’ll give them that. But most BHAGs aren’t nearly so clear. For example, a common BHAG would be something like “become the #1 PropTech company in the industry.” Well, how exactly are we defining #1? I came from the airline industry before PM, and there are at least a dozen ways to define “the #1 airline.” That’s why multiple airlines are usually claiming the title at any given time. One company is using number of flights, another is using number of passengers, another is using number of planes, etc. The vagueness is a feature, not a bug, for the BHAG crowd, though. The tendency to claim victory when victory hasn’t really been achieved is the mark of a narcissistic visionary, and vague goals make that very easy to do. The problem is that this ambiguity eventually leads to demoralizing of the team, especially the members of the team who are more operationally inclined. Sure, you’ll have the sales and marketing teams on your side all day long, but the people having to actually do the day-to-day business of the company are going to become increasingly annoyed with the lack of true direction. It can even make decisions nearly impossible, as without a clear goal, it becomes incredibly difficult to figure out which decision is the right one. Clarity in goals brings clarity in decision making.
BHAGs also tend to be unrealistic. They don’t factor in current operational capabilities or what is required to change the calculus in order to make the goal achievable. As a result, questionable and even unethical business decisions may get made in order to keep pushing towards the BHAG once the reality of the situation sets in. I mentioned the goal in the 60s to put a man on the moon by the end of the decade. We achieved this goal, but at great cost. We were rushing to beat the Soviets and beat our own timetable, and as a result, we took great risks that we wouldn’t have otherwise taken. Engineering concerns were ignored and safety reviews were inadequate. As a result, Gus Grissom, Ed White, and Roger Chaffee burned to death in Apollo 1 while conducting a pre-launch test. This wasn’t a surprise to the engineers. They had already expressed their concerns. But engineers like SMART goals, and that didn’t fit with the vision. So American heros died. If you want to see even more egregious examples of this, look at the Soviet space program of the same time. The unethical and downright outwardly dangerous things that they did to achieve their own BHAG of beating us to the moon would have been unfathomable to us (if we had even known about them at the time). The Soviet Union was able to cover up most of this for decades, but nearly 100 people died in the Soviet space race.
BHAGs also have poor feedback loops. Because BHAGs are generally vague and have long time horizons, they don’t provide good checkpoints along the way to judge your performance and make course corrections. The element of measurability in a SMART goal is completely missing from the average BHAG, which makes it nearly impossible to judge your performance at any given time and make needed adjustments.
BHAGs are also exhausting to most personality types. They create a constant, unrelenting pressure to achieve something that they know is unrealistic. This creates a feeling of dread about going to work, not the positive, uplifting, motivating feeling that the visionary is looking for. Many times these visionary leaders will shield themselves from this by surrounding themselves with yes-men. Meanwhile, the business is rotting from the inside out while all of the operational employees are becoming disgruntled, burnt out, and frustrated.
As an example of all of this, let’s look at WeWork, one of the best examples of a failed BHAG in history. I remember when a TV miniseries came out about WeWork and it cast Jared Leto as founder Adam Neumann, and I just thought “damn, that’s great casting, you got the biggest narcissist in acting to portray the biggest narcissist in business.” WeWork’s BHAG was “elevate the world’s consciousness.” Notice how this BHAG says absolutely nothing about the actual business. For those not familiar, WeWork is a real estate company. It leases shared office space. This should be one of the most boring businesses in the world if run right, but instead, Adam Neumann turned it into a cult. He told employees that they were part of a “global revolution” and he held mass pep rally style events where he took on a messianic style about him. This led to bad decision making, such as taking on long-term leases in premium commercial office spaces without any proof of concept or sound business plan. The company burned through cash, and eventually had a failed IPO that ended up leading to the ouster of Neumann.
Ambition without accountability doesn’t work. And ambition without accountability is what BHAGs are all about.
The SMART Alternative
Forget about inspiration; that takes care of itself with real progress. Let’s focus on what actually works to create that progress with SMART goals.
A good SMART goal will force the entire organization to align around a very clear and attainable goal. Because everyone can clearly see what success looks like, and they’re able to believe that’s it possible, they will make decisions and modify behavior in order to work towards that goal. As you highlight milestones along the way where real progress is being made, it gives the team real motivation instead of manufactured giddiness from select personalities.
SMART goals also make it very easy to create those checkpoints along the way to gauge your performance. Because SMART goals are quantifiable and time-bound by definition, you’re easily able to judge your progress towards the goal at any point along the way. If you are missing a milestone, then that is giving you solid feedback so that you can make adjustments. This creates a culture of accountability for everyone at the company, including you (which is one reason that visionary style leaders don’t like it, as they want to be seen as mythical figures rather than real people who must be held accountable). Typically, as progress is made, momentum builds, and you’re able to narrow down what is working and what’s not, accelerating your progress towards the goal.
So, if WeWork was the quintessential example of bad BHAGs, what’s the equivalent example of SMART goals working wonders? Well, there are lots. Just ask ChatGPT and it will spit out a litany of them. But I’ll focus on a company whose product I’ve used, HubSpot. The reason I love to use HubSpot as an example is that they focused on making SMART goals part of their Sales & Marketing teams, the two departments who are most loathe to use them, and it worked famously. HubSpot coined the term “Smarketing” to describe their SMART goals in these departments. The idea was a unified SMART goal for these two departments that forced them to work together, plus work with Operations, to ensure success.
An example HubSpot SMART goal would be “increase MQL-to-SQL conversion rate from 30% to 45% by the end of the 2nd quarter through lead scoring optimization and targeted content campaigns.” There is ZERO ambiguity in this goal. Everyone in the company can understand it and know what success looks like, and it even gives a roadmap for how to achieve it. Of course, HubSpot regularly achieves their goals, and contrary to what the BHAG bros would tell you, it hasn’t held them back. HubSpot is an absolute powerhouse. They literally own nearly 40% of the entire global market for marketing automation. Just a decade ago, they were doing only $115 million in revenue and were a tiny player in the marketing automation space. Now they do $2.6 billion in revenue and dominate the space. All from SMART goals. Pass the word on to a BHAG bro.
Maybe a Hybrid Model?
Some business leaders have looked at all of this and come up with the idea that maybe a hybrid approach would be best, combining a BHAG for a lofty overall mission with more realistic SMART goals for structure. Of course, this just dilutes things and gives you a worst of both worlds situation.
This creates a culture of mixed messages and confusion. What’s the real goal? Is it the BHAG? What if I think the SMART goal is getting in the way of the BHAG? Do I ignore the SMART goal and prioritize the BHAG? Or vice-versa? Ultimately, you end up with different departments, and even different individuals within departments, coming up with their own north stars trying to reconcile the contradictions.
The other problem is that the BHAG tends to monopolize attention. When decisions need to be made, leaders will tend to err on the side of the BHAG, both because it’s more “sexy” and because it’s more vague, so accountability is easier to avoid. Resources tend to get shifted to the BHAG even at the expense of the SMART goals, because it’s considered to be the grander vision. The ultimate result is a tug-of-war, with the SMART goals usually losing, which means the business usually ends up losing.
That said, it isn’t impossible to make a hybrid approach work, but it has to be very carefully designed. If you do this, your BHAG needs to be closely aligned with your SMART goals so that there can be no confusion and no conflict between them. This can be incredibly difficult to do in practice, because the vagueness of a typical BHAG can make it pretty easy for people within the organization to dream up their own conflicts and prioritize the wrong things. Do this with extreme caution (or better yet, don’t do it at all and just stick with SMART goals).
For a look at a good way to try a hybrid model, look to EOS. EOS recommends having an overriding mission statement that is relatively generic, but then it also mandates that you have 10-year, 3-year, 1-year, and quarterly SMART goals. And they MUST fully align with the big mission statement. If you’re going to try a hybrid model, this is the one to use. I actually use this in my own business, but to avoid the problems described above, we focus meetings on the SMART goals and only discuss the mission statement during quarterly “state of the company” addresses.
Inspiration is Not Strategy
Real leaders choose discipline over drama, and BHAGs create drama. While giving an inspirational speech about a BHAG may make you feel good and appeal to your visionary nature, it ultimately isn’t good for the business, and it won’t give any sort of real motivation to your employees for any significant period of time.
I bash Tony Robbins in this publication frequently, but really, he deserves more, so let’s go! There are plenty of respected academic studies that have been done that show that all of this motivational and inspiration hype doesn’t produce any sort of real results for people, even the type of people who are drawn to it. Studies show that there is a short-lived emotional boost which quickly dissipates, and there are absolutely no lasting changes in behavior or even emotional well-being. Psychologist Bobby Hoffman even published a well-regarded article in the journal “Psychology Today” that argued that motivational events such as a Tony Robbins seminar can leave people feeling disillusioned when the promised impacts don’t quickly materialize (because they never do). This is what you’re doing to your people with these BHAGs. You’re just setting them up for failure and disillusionment.
Instead, focus on SMART goals that will bring your team along and make them feel like successes as they achieve milestones along the way. Build a HubSpot instead of a WeWork.
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I recently wrote an article talking about the M&A report put out by Peter Lohmann, which of course spurred a lot of discussion about the topic. One question has been “how can I get help with buying or selling myself?” While I have a limited amount of time available to help with such things for friends and current consulting clients, my schedule is pretty booked, so I’d encourage you to reach out to Deb Newell at Real-Time Consulting Services. Deb is a good friend and incredibly experienced at PM M&A. Whether you need a business valuation or help with the whole transaction, I recommend that you seek out her assistance. She has even helped me with my own transactions. Yes, that’s right, a good consultant always has a consultant of their own.
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Debate Me
Disagree with my take here? Have a different perspective? There’s nothing I love more than a good debate or even just an intelligent conversation. If you’d like to jump on a podcast recording with me to discuss this topic, please let me know!
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