The common sales practice of setting stretch goals — those targets well ahead of what would normally be seen as possible — to boost performance does not benefit most businesses.
They tend to push staff to take bigger risks or make them feel so overwhelmed that they give up.
Researchers used two experimental studies to investigate the impact on performance of both stretch, or seemingly impossible, goals and moderate, or achievable, goals.
Dr Miles Yang, from the School of Management at Perth’s Curtin Business School, says the research challenges the conventional wisdom that stretch goals have a positive impact.
“Many academics, consultants, and managers advocate stretch goals to attain superior organisational performance,” Dr Yang says.
“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.”
The research finds that stretch goals increase the willingness to take risks and undermine commitment to goals.
“We find that stretch goals are not a rule for riches for all businesses,” he says. “Instead, they lead to riches for only a few organisations.”
The paper, Stretch Goals and the Distribution of Organisational Performance, is published in the journal Organization Science.
The research also involved researchers from UNSW, Deakin University and Sloan School of Management at Massachusetts Institute of Technology.
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