Research shows that the performance of employees improves when they receive a challenging budget. Why? Because they view not meeting it as a failure. Most employees are motivated to work more intensely to avoid failure than to achieve success (they are loss-averse). As employees get closer to a goal, they work harder to achieve it. Creating a little anxiety improves performance. However, overly ambitious and unachievable budgets can de-motivate employees because they see little chance of avoiding failure. As a result, many executives like to set demanding, but achievable, goals for their subordinate managers and employees.* General Electric’s former chief executive officer (CEO) Jack Welch describes challenging, yet achievable, budgets as energizing, motivating, and satisfying for managers and other employees and capable of unleashing out-of-the-box and creative thinking.