When Goals Both Enhance and Destroy Performance
- Dominique Giger
- Jan 18
- 6 min read
What Research Really Shows About Goal Setting, Motivation, and High Performance
Introduction: The Silent Power of Goals
Goals are widely regarded as one of the most powerful leadership instruments in modern organisations. They structure work, focus attention, prioritise resources, and signal what is considered success. Hardly any performance or transformation programme operates without ambitious target systems, KPIs, or OKRs.And yet, numerous scandals, organisational failures, and the quiet erosion of motivation reveal a critical truth: goals are not neutral.
The central question, therefore, is not whether goals work, but how they work.
Do they foster sustainable performance or merely short-term output?
Do they motivate, or do they create pressure, demotivation, and unethical behaviour?
This article integrates insights from goal-setting research, motivational psychology, and organisational practice. It explains why many well-intentioned goal systems systematically produce unintended side effects-and how leaders can counteract them.
1. Goal Difficulty: Why Ambitious Goals Can Increase Performance
Intuitively, many assume that performance eventually declines as goals become more difficult. Overly ambitious goals, so the common belief, demotivate. Research, however, paints a more nuanced picture.
Edwin Locke and Gary Latham demonstrated in their Goal-Setting Theory that there is a positive, linear relationship between goal difficulty and performance - provided the goal is accepted (Locke & Latham, 2002). What matters is not objective difficulty, but the subjective perception of meaning and attainability.
An ambitious goal can inspire.A trivial goal can bore.An ambitious goal perceived as meaningless creates resistance.
Netflix CEO Reed Hastings therefore frames goal setting not as a question of height, but of acceptance. Goals are intensely discussed, not simply imposed. Leadership shifts from control to sense-making.
Excerpt from the Netflix Culture Memo:
“[…] We have developed an unusual company culture focused on excellence and creating an environment where talented people can thrive. […] People achieve better results when they have the information and freedom to make decisions themselves. We hire exceptionally responsible people who benefit from this openness and freedom. […]”
Leadership implication:
The decisive question is not: “How high should we set the goal?”
But rather: “Why should this goal make sense to my team?”
2. Stretch Goals: High-Risk Instruments with Side Effects
Stretch goals are extremely ambitious, seemingly unattainable targets. In many organisations, they are seen as engines of breakthrough performance. In the short term, they can indeed increase output. Over time, however, significant risks emerge.
Research and practice repeatedly document the same patterns:
Unethical behaviour
Manipulation of numbers
Tunnel vision
Stress and burnout
An early example comes from the 1990s: at Sears, mechanics were given aggressive sales targets. To meet them, unnecessary repairs were performed. Revenue increased - but customer trust collapsed.
The Miniscribe case shows the extreme outcome: employees shipped bricks instead of hard drives and manipulated financial statements to meet bonus targets. Toshiba inflated profits by more than USD 1.2 billion over several years to meet internal return targets.
These patterns occur across industries - and not only in profit-driven organisations, but also in science and education. The key insight: these are not morally deficient individuals, but systems that create pressure without psychological safety.
Amy Edmondson’s research shows that without psychological safety, risk aversion, concealment, and rule violations increase significantly (Edmondson, 2018).
3. Why Stretch Goals Often Create Dissatisfaction-Despite Higher Performance
A frequently overlooked effect of ambitious goals is emotional dissatisfaction. People do not evaluate performance in absolute terms, but relative to the goal.
Victoria Medvec and colleagues studied this effect at the Olympic Games. The well-known result: bronze medal winners are often happier than silver medal winners (Medvec et al., 1995).
Why?
Bronze is compared to “not being on the podium,” leading to greater satisfaction: “At least I won a medal.”
Silver is compared to gold, leading to frustration: “I almost won gold.”
Transferred to organisations, this means:
A team can objectively achieve more - and still feel worse if attention centres on what was missed. Progress becomes invisible; the gap dominates perception.
4. SMART Goals: Tactically Brilliant-Strategically Dangerous
SMART goals (Specific, Measurable, Agreed upon, Realistic, Time-bound) are widely used - and useful. They create clarity, measurability, and emotional distance. They are particularly effective in problem definition.
However, SMART goals have clear limitations.
4.1 Blindness to Meaning and Values
SMART says nothing about whether a goal is meaningful or value-consistent.
The Ford Pinto is a classic example:
Cost limit: USD 2,000
Market launch: by 1971
The goal was SMART. The result: severe safety flaws, fatalities, and reputational damage.
SMART optimises execution - not direction.
4.2 Unethical Behaviour Near the Goal Line
Studies show that people who narrowly miss specific goals are significantly more likely to misreport than those who are far away (Schweitzer et al., 2004).
Often referred to as the “Goals Gone Wild” effect, this phenomenon reflects a core insight from behavioural economics: the closer a person gets to a goal, the more painful failure feels (loss aversion).
Those far from a goal see little chance of reaching it through small manipulations. Those who are “almost there” are more likely to push results over the finish line through misrepresentation - for example, exaggerating performance.
4.3 Discrete Goal Islands and Cannibalisation
SMART goals view objectives in isolation. Interdependencies remain invisible.
This becomes particularly evident in product launches:
Each product receives its own SMART goal
Marketing resources become fragmented
Products cannibalise each other
Customer focus disperses
The problem is not a lack of goal clarity, but a lack of goal coherence.
4.4 The Tunnel Vision Effect
The famous basketball experiment shows that the more specific a task, the greater the blindness to the surrounding environment (Simons, 2010). In complex systems, “do your best” can be more effective than highly specific targets.
5. Motivation: Why Money Rarely Leads to Excellence
What truly motivates people?
Frederick Herzberg’s Two-Factor Theory distinguishes between:
Hygiene factors (e.g. salary): prevent dissatisfaction
Motivators (e.g. meaning, autonomy, recognition): increase motivation
Money is necessary to avoid dissatisfaction - but insufficient for motivation and satisfaction.
Dan Ariely’s LEGO experiment illustrates this vividly: when work is devalued or destroyed, motivation drops dramatically - even when people are paid (Ariely et al., 2008).
Further studies show:
Fundraising teams increased performance by over 140% after experiencing the impact of their work (Grant, 2008)
Radiologists improved diagnostic accuracy by 46% when they saw their patients (Grant & Hofmann, 2011)
Bonuses provide short-term motivational boosts, but meaning is the true driver of sustained performance and commitment.
6. Four Motivation Traps in Organisations
Projection: We assume others are like us and project our own values onto them.
The Money Myth: More money equals more satisfaction. This is only partially true. Money secures basic needs and can increase well-being, but factors such as social connection, recognition, and feeling needed are often more important than the amount itself.
Wrong Rewards: Rewards are misaligned with desired outcomes - for example, quantity is rewarded while quality is merely expected.
Ignored Fairness: We assess our performance, rewards, and status by comparing ourselves with others. Perceived disadvantage creates imbalance and a sense of injustice.
7. Fairness, Equity, and the Limits of Well-Intended Equality
Equity Theory (Adams, 1965) shows that people evaluate not absolute rewards, but the ratio of input to output - compared to others.
In one study, 59% of 2,500 managers preferred a smaller bonus if it was the highest in the team.
Experiments with capuchin monkeys show the same reaction to inequality.
The case of Gravity Payments illustrates the downside: well-intended equality led to the resignation of high-performing employees.
Summary
Goals and motivation are not technical control problems. They represent a balancing act between performance, meaning, fairness, and culture. High performance does not emerge from increased pressure, but from intelligent goal architecture and psychologically grounded leadership.
Ideas for Next Steps
Review goal systems systemically, not in isolation
Combine SMART goals with meaning and values
Consciously integrate intrinsic and extrinsic incentives
Address fairness explicitly
About the Author
Dominique Giger is a Coach, Speaker, and Transformation Expert with over 18 years of international experience in change and performance programmes. She holds an MSc in Computer Science from ETH Zurich and combines technical expertise with practical experience and deep knowledge in neuroscience, psychology, and coaching. Her focus lies on healthy high performance, leadership, and the intelligent use of artificial intelligence.
In her podcast Y-SHIFT: The Next-Level Mindset & Transformation Podcast, she regularly shares insights from the world of modern psychology, neuroscience, and leadership development.
Episode on this topic (in German): Goals and motivation in a reality check
YouTube: https://youtu.be/JoM74GtskN8
Apple Podcast: https://podcasts.apple.com/us/podcast/folge-28-ziele-und-motivation-im-realit%C3%A4tscheck/id1801021329?i=1000745139067
References (Selection)
Locke, E. A., & Latham, G. P. (2002). Building a practically useful theory of goal setting and task motivation. American Psychologist.
Edmondson, A. (2018). The Fearless Organization. Wiley.
Medvec, V. H. et al. (1995). When less is more: Counterfactual thinking. Journal of Personality and Social Psychology.
Schweitzer, M. et al. (2004). Goal setting as a motivator of unethical behavior. Academy of Management Journal.
Herzberg, F. (1968). One more time: How do you motivate employees? Harvard Business Review.
Ariely, D. et al. (2008). Meaningful work. Journal of Economic Behavior & Organization.
Grant, A. M. (2008). The significance of task significance. Journal of Applied Psychology.
Adams, J. S. (1965). Inequity in social exchange. Advances in Experimental Social Psychology.
Netflix (2025). Netflix Culture Memo.
Simons, D. J. (2010). The Monkey Business Illusion.
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