Abstract for: Stretch Goals, Managerial Responses, and the Distribution of Performance

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 the shape of the performance distribution. Here, we explore the effects of goal difficulty on performance in an experimental study. Participants were given either moderate or stretch goals for profit in the People Express management simulation. When compared with moderate goals, stretch goals improved performance for a few, while many found the stretch goals too difficult and abandoned them. Consequently, stretch goals led to higher performance variance and a right-skewed performance distribution but did not improve median performance. In complex dynamic environments, discovering and implementing strategies to realize stretch goals is difficult and risky, and, instead, some managers adopt lower self-set goals or focus on survival. Strategy research typically investigates the mean effects associated with different strategic choices but there is limited knowledge about how these different strategic choices–including setting stretch goals–affect performance distributions. Understanding the shapes of distributions associated with alternative strategic choices is important and experiments using management simulations that closely approximate the decision-making environments of executives–by incorporating feedback, delays, and nonlinearities–provide excellent platforms for such research.