Organizational stretch goals and performance distribution

Abstract

Research on organizational goals has long played an important role in organization theory. Central to organizational decision-making processes, organizational goals shape how managers interpret organizational performance, frame strategic responses, and search for solutions through performance feedback. Many academics, consultants and managers advocate stretch goals to attain superior individual and organizational performance. However, there is limited research exploring the effects of stretch goals on organizational performance. This dissertation attempts to address the question: what is the impact of organizational stretch goals on performance distribution? Three experimental studies are presented to explore the causal relationship between organizational stretch goals and the distribution of performance. One critical insight is that stretch goals compared with moderate goals do not necessarily lead to higher performance, but generate higher performance variance and lead to right-skewed distribution. The findings extend theory on organizational goals and suggest caveats for the adoption of stretch goals.