What do multiple objectives really mean for performance? Empirical evidence from the French manufacturing sector

Tomasz Obloj and Metin Sengul

Strategic Management Journal, 2020, vol. 41, issue 13, 2518-2547

Abstract: Research Summary We explore the performance consequences of the simultaneous pursuit of multiple objectives in organizations. Taking advantage of a unique dataset covering both the objectives pursued and performance outcomes, we test the hypothesis that is the cornerstone of multiple objectives theory: performance on a given metric increases when it is pursued as an objective but decreases with the number of other objectives pursued simultaneously. We find overall support for this hypothesis, which holds for most, but not all, objectives. We further unpack the link between multiplicity of objectives and performance, investigating the moderating effects of organization design choices. This study suggests that multiple objectives impose a cost on organizations, but also provide a benefit of alleviating tradeoffs in achieving higher performance in multiple dimensions. Managerial Summary Most organizations simultaneously follow multiple goals, rather than focus on a single, well‐defined objective. For example, manufacturing firms often concurrently strive to decrease costs, increase revenues, and enhance margins. We study the consequences of such pursuit for firm performance. We show that explicitly setting objectives plays an important role in driving performance improvements. We also show that performance on any given dimension decreases with the number of other, simultaneously, followed goals. This regularity holds across different types of organizations, from simple to complex. Finally, we show that setting goals in multiple dimensions can play a beneficial role in forcing firms to actively manage tradeoffs inherent in their strategic choices. Our findings point to how managers could balance the costs and benefits of multiple objectives.

Date: 2020
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Citations: View citations in EconPapers (13)

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