Study Published in INFORMS Journal Reveals Detriment of Stretch Goals

Institute for Operations Research & Management Sciences pic

Institute for Operations Research & Management Sciences

Dallas-based business consultant Anthony “Tony” Hartman possesses more than 20 years of experience in the field. Over the course of his career, Anthony Hartman of Dallas has become familiar with a range of business practices, and he has been a repeated lecturer and presenter at such professional events and organizations as the Institute for Operations Research & Management Sciences (INFORMS).

Recently, INFORMS, the leading international association for the operations research and analytics industry, published the results of a study entitled Stretch Goals and the Distribution of Organizational Performance. This study was conducted by researchers at the University of New South Wales Business School and the Sloan School of Management at MIT, among others, and was published in INFORMS’s journal Organization Science.

Participants in the study were assigned moderate or stretch goals relating to the management of the computer-based business simulation program People Express. Roughly 80 percent of the individuals who were assigned stretch goals failed to meet these goals. Performance among these individuals was not significantly higher than among the individuals who were assigned moderate goals. Further, many of the individuals in the stretch goals group either abandoned their assigned stretch goals to adopt more reasonable self-set goals or worked toward a survival goal to avoid bankruptcy.

In addition to these results, the study found that assigning stretch goals was associated with larger performance shortfalls, lower risk-adjusted performance, reduced commitment to assigned goals, and larger performance variation between organizations.

Based on the study, researchers believe that most organizations do not benefit from setting stretch goals for managers. Large companies with a higher risk tolerance may still prefer setting these types of goals because they are more capable of handling the potential drop in performance. Meanwhile, family-owned and medium-sized businesses may struggle with the fallout and are better suited for moderate goals.