Stretch Goals and the Distribution of Organizational Performance

Michael Shayne Gary (), Miles M. Yang (), Philip W. Yetton () and John D. Sterman ()
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Michael Shayne Gary: UNSW Business School, University of New South Wales, Sydney NSW 2052, Australia
Miles M. Yang: Curtin Business School, Curtin University, Bentley, Western Australia 6102, Australia
Philip W. Yetton: Faculty of Business and Law, Deakin University, Geelong Victoria 3220, Australia
John D. Sterman: Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142

Organization Science, 2017, vol. 28, issue 3, 395-410

Abstract: Many academics, consultants, and managers advocate stretch goals to attain superior organizational performance. However, existing theory speculates that, although stretch goals may benefit some organizations, they are not a “rule for riches” for all organizations. To address this speculation, we use two experimental studies to explore the effects on the mean, median, variance, and skewness of performance of stretch compared with moderate goals. Participants were assigned moderate or stretch goals to manage a widely used business simulation. Compared with moderate goals, stretch goals improve performance for a few participants, but many abandon the stretch goals in favor of lower self-set goals, or adopt a survival goal when faced with the threat of bankruptcy. Consequently, stretch goals generate higher performance variance across organizations and a right-skewed performance distribution. Contrary to conventional wisdom, we find no positive stretch goal main effect on performance. Instead, stretch goals compared with moderate goals generate large attainment discrepancies that increase willingness to take risks, undermine goal commitment, and generate lower risk-adjusted performance. The results provide a richer theoretical and empirical appreciation of how stretch goals influence performance.

Keywords: goals; aspirations; stretch objectives; performance variance; skewed distribution (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (10)

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