Immediately upon asking this question, two words come to
mind: high performance – distancing my company in market share from the competition
– and high margin (Merrill Lynch, 200) – year-over-year sales growth and
expansion of capabilities, breadth of offering, and service. Sure, these are lofty goals, especially
considering the ever-decreasing timeframe of competitive advantages in today’s
innovative industries (Gailbraith, 2002), but setting the bar high has its
advantages.
This “setting the bar high” mentality would characterize the
culture developed at my firm. In order
to exceed expectations quarter after quarter, a company must always set ambitious
goals. In the article (see references
section), Kerr and Landauer (2004) define this practice as implementing stretch
goals, or goals that are seemingly difficult, but not impossible, to reach
(Kerr & Landauer, 2004).
Themes can be drawn between the Kerr and Landauer (2004)
article and the readings from CMGT 500 this week. Hofstede (2006) includes a process oriented
v. results oriented paradox as a dimension of organizational culture and this
paradox closely resembles the two purposes of stretch goals. Goldman Sachs implements a process oriented
(Hostede, 2006) type of “stretch” culture where the primary purpose of their
stretch goals is to develop a strong cadre of future leaders (Kerr &
Landauer, 2004). GE takes a
results-oriented (Hofstede, 2006) approach by using stretch goals to improve
effectiveness and profitability (Kerr & Landauer, 2004).
If the rule is that a strong corporate culture inhibits a
firm’s ability to change and adapt to a dynamic environment (Sorenson, 2009),
then there are certainly exceptions. GE
and GS both enjoyed long periods of growth in dynamic industries by promoting
this strong corporate culture of overachievement. In fact, Denison and Mishra’s (1995) four
cultural traits of effective organizations can be integrated with a stretch
goal approach because of the “conversations, energy, and activities” (Kerr
& Landauer) stimulated by lofty expectations.
Some might argue that there are numerous weaknesses in such
a stretch goal culture. Such a culture
could produce perpetually unhappy employees who never reach established goals. Well, just like any other organizational
strategy, stretch goals must be tactfully used in order to be effective. GE learned that stretch goals could only be
positioned for a select number of employees in designated departments (Kerr &
Landauer, 2004), and that there should be a scientific way of handling failure
in a results oriented stretch goal culture.
For those companies that seek to provide maximum equity for
shareholders (Franklin, 2008), stretch goals are devices worth considering.
Denison,
D.R. & Mishra, A.K. (1995) Toward
a theory of organizational culture and effectiveness.Organization
Science, 6, 204-223.
Galbraith, J.R. (2002)Designing Organizations, pp. 73-90 (Chapter 6)
Hofstede,
G. (2006). Dimensionalizing
Cultures: The Hofstede Model in Context. Online
Readings in Psychology and Culture. (full article)
Kerr, S. & Landauer, S.
(2004). Using Stretch Goals to Promote
Organizational Effectiveness and Personal Growth: General Electric and Goldman
Sachs. The Academy of Management
Executive, 18 (4).
Merrill Lynch. (2000). How To Read A Financial Report Merrill Lynch, Pierce,
Fenner & Smith Incorporated
Sorenson, J. (2009) Note on
Organizational Culture, Harvard Business School, pp. 1-6
Casey, sounds like an interesting article. I find it noteworthy that Kerr and Landauer published in 2004, a few years before the recent banking crisis and resulting recession. Many people argued that certain banks focused too much on results (profits) and not enough on the process. Because of this, many risky lending practices were implemented because the short-term payouts were high. In light of this, do you think some organizations’ culture should become more process-oriented? Do you think Kerr and Landauer (2004) would revise their conclusions?
ReplyDeleteTouche, Courtney. That WAS before the recent crash and recession. Concerning Goldman Sachs, I think Landauer (2004) would remain consistent with his observation. He primarily focused on GS's employee development and I think that argument is still fairly strong even considering the recession. Despite my earlier statements, I'm certainly not saying GS's processes are not to blame and I'm sure there is no shortage of researchers who have made strong arguments against the culture, goal-setting, and operations of GS.
DeleteYour comment has made me rethink some of the points I made in the post. I still stand by my belief in setting ambitious goals, but it's possible that GE's "stretch" culture was eventually somewhat problematic. Maybe these "stretch" goals are putting short term gains in front of long term success. Or maybe not, since GE was able to be consistently dominant for the duration of Jack Welch's tenure.
Perhaps America's stretch culture - characterized by GREED - is one of the primary reasons for the recession. Our biggest strength can sometimes be our biggest weakness.
Hi Casey,
ReplyDeleteI enjoyed your post. It was great to find out what the organization of your dreams looks like!
The idea of a stretch goal culture is really interesting. You make a great point about how this could impact the morale of employees who feel like they’re never going to be able to live up to organizational expectations. That does sound like it could lead to a very defeating environment. I wonder if this aspect of a stretch goal culture could be mitigated if the organization’s leaders found ways to balance the internal cultural element of involvement with the external element of mission (Denison & Mishra).