The commonly used practice among businesses of introducing stretch goals to boost performance does not benefit most businesses, new research involving a Curtin University researcher has found.
In a paper published in Organization Science, researchers used two experimental studies to investigate the impact on performance of both stretch, or seemingly impossible, goals, and moderate, or achievable, goals.
Co-author Dr Miles Yang, from the School of Management at Curtin Business School, said the research challenged the conventional wisdom that stretch goals have a positive impact on performance among businesses.
“Many academics, consultants, and managers advocate stretch goals to attain superior organisational performance,” Dr Yang said.
“While the advocates of stretch goals suggest that stretch goals boost innovation and improve organisational performance, our research shows that this is the exception, and not the rule. For many organisations, stretch goals can undermine performance.
“When compared with moderate goals, our research finds stretch goals generate large attainment discrepancies that increase the willingness to take risks, undermine goal commitment, and generate lower risk-adjusted performance.
“We find that stretch goals are not a rule for riches for all businesses. Instead, they lead to riches for only a few organisations.”
The research also involved researchers from UNSW, Deakin University and Sloan School of Management at Massachusetts Institute of Technology.
The paper, Stretch Goals and the Distribution of Organizational Performance, can be viewed online here.