Organizational Goals: Antecedents, Formation Processes and Implications for Firm Behavior and Performance

• DOI: http://doi.org/10.1111/ijmr.12170
• Author: Alfredo Massis,Mike Wright,Federico Frattini,Josip Kotlar
• Published date: 01 January 2018
• Date: 01 January 2018

International Journal of Management Reviews, Vol. 20, S3–S18 (2018)

DOI: 10.1111/ijmr.12170

Organizational Goals: Antecedents,

Formation Processes and Implications for

Firm Behavior and Performance

Josip Kotlar,1Alfredo De Massis,1,2 Mike Wright3,4 and Federico Frattini5

1Lancaster University Management School, Lancaster LA1 4YX, UK, 2Free University of Bozen-Bolzano, 39100,

Piazza Universit`

a 1, Bolzano, Italy, 3Imperial College Business School, Exhibition Road, London SW7, UK, 4ETH,

Zurich, and 5Politecnico di Milano, 4/b Via Lambruschini, Milan 20133, Italy

Corresponding author email: alfredo.demassis@unibz.it

The existence of def‌inite organizational goals is a longstanding and central premise in

organization and management research,yet a re-examination of this body of knowledge

is timelyand long overdue. Many important aspects of organizational goals havereceived

very fragmented attention, and there has been little prior attempt to synthesize and

compare the effects of these different goals on f‌irm behavior and performance. The

authors presenta review of existing theoretical and empirical evidence on organizational

goals, and develop an analytical framework emphasizing the variety of organizational

goals, their attributes,antecedents and outcomes, the role of contextand feedback loops.

Drawing on this framework, the authors set out an agenda for further research aimed

at advancing current understanding of organizational goals and implications for f‌irm

behavior and performance.

Introduction

The existence of def‌inite organizational goals is a

central premise in organization and management

research. It is more than 50 years since Cyert and

March’s (1963) study on the behavioral theory of the

f‌irm, and more than 30 years since Fama and Jensen’s

(1983a,b) work on the effects of differences in goals

arising from variety of ownershipand control. Several

decades since the publication of these seminal studies,

organizational goals continue to play a central role in

management research (e.g. Argote and Greve 2007;

Fiegenbaum et al. 1996; Greve 2003; Shinkle 2012)

and practice (e.g. Collins 2017; Kaplan and Norton

2007; Levinson 2003). However, many important as-

pects of organizational goals, especially those related

to their antecedents, the processes through which they

are formed and their organizational consequences

have received very fragmented attention, and are

thus only loosely integrated in our understanding of

organizational behavior and performance. This lack

of understanding is given added emphasis by recent

political and social trends from parties of both the

left and the right that call into question the purpose

of the corporation and its role in addressing social

and environmental challenges (Mayer et al. 2017;

Mitchell et al. 2016; Phan et al. 2016; Porter and

Kramer 2014). Thus, a re-examination of the concept

of organizational goals, as well as their antecedents

and consequences, is timely and long overdue.

Given the importance of goal-setting for predicting

organizational behaviors and outcomes, it is essential

to develop a more detailed and comprehensive un-

derstanding of the factors affecting f‌irms’ decisions

to pursue a specif‌ic set of goals. In this paper, we

present a review of existing theoretical and empirical

evidence on organizational goals, and develop

an analytical framework emphasizing the variety

of goals pursued by business organizations, their

antecedents, formation processes and outcomes, the

role of context and feedback loops. We then provide

an overview of the papers published in this special

C2018 British Academy of Management and John Wiley & Sons Ltd. Publishedby John Wiley & Sons Ltd, 9600 Garsington

Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA

S4 J. Kotlar et al.

issue and conclude by proposing an agenda to inform

future studies in this area.

Multiple facets of organizational goals

Organizational goals can be broadly def‌ined as de-

sired organizational outcomes that can be used to

guide action and appraise organizational performance

(e.g. Mohr 1973), but distinct from measurable tar-

gets (March and Simon 1958). There has been much

debate about what actually constitutes an organiza-

tional goal, and different theoretical traditions offer

different conceptualizations. In classic economic the-

ory, f‌irms weretraditionally seen as monolithic actors

that, under the assumption of perfect rationality, pur-

sue a unitary goal of prof‌it maximization. However,

this perspective wascritically extended over the years.

For example,scholars have argued that ‘off‌icial’ goals

stated in vision and mission statements do not always

accurately ref‌lect what actually drives organizational

behavior (e.g. Perrow1961). Most notably,in the sem-

inal book A Behavioral Theory of the Firm,Cyertand

March (1963) noted that people have goals, but col-

lectivities of people do not. Subsequently, researchers

haveput substantial effort into understanding the indi-

vidual goals of those individuals who are most able to

inf‌luence what the organization actually does, includ-

ing emphasis on major decision-makers, the executive

core or the dominant coalition (Connolly et al. 1980).

Cyert and March (1963) argued that organizational

goals are not unitary and given, and emphasized that

the f‌irm is a coalition of shareholders, managers, em-

ployees and other parties, each with their own goals.

Thus, organizational goals are the result of continued

bargaining and stabilization processes among rele-

vant parties within the f‌irm, leading to multiple di-

mensions along which organizational goals are set,

including production, inventory, sales, market share

and prof‌itability. Moreover, behavioral theory sug-

gests that organizational goals inf‌luence f‌irm behav-

ior through processes of satisf‌icing, search, adaptive

learning and sequential attention (Cyert and March

1963; March and Simon 1958). These basic insights

had a tremendous impact on subsequent theory and

research (Argote and Greve 2007), resulting in a vari-

ety of related perspectives, each putting emphasis on

different dimensions and characteristics of organiza-

tional goals.

Fiegenbaum et al. (1996) integrated major theoreti-

cal perspectives to form a three-dimensional matrix of

organizational goals. Specif‌ically, motivation theory

(Latham and Yukl 1975), prospect theory (Kahne-

man and Tversky 1979) and the resource-based view

of the f‌irm (Barney 1991) provide insights into the

content of organizational goals, such as strategic in-

puts used to evaluate employees’ performance, and

strategic outputs used to evaluate the performance

of managers. Industrial economics (Porter 1980), re-

source dependence (Pfeffer and Salancik 1978) and

institutional theory (DiMaggio and Powell1983) per-

spectives, in turn, elucidate the terms of reference

that f‌irms use to evaluate organizational goals in re-

lation to the external environment, including com-

petitors, customers and other stakeholders. Finally,

Fiegenbaum et al. (1996) underscore the importance

of time as a further dimension of organizational goals,

suggesting that they can be def‌ined either in relation

to the past accomplishments, as per corporate iden-

tity (Dutton and Dukerich 1991) and organizational

learning (Levitt and March 1988) perspectives, or in

relation to future ambitions, as per the strategic intent

perspective (Hamel et al. 1989).

In addition to underlining the multidimensional na-

ture of organizational goals, prior research also em-

phasizes that organizational goals are directly linked

to goals at other levels of analysis, including indi-

vidual, group and institutional levels. Finally, directly

emanating from the behavioral theory of the f‌irm is

the notion that organizational goals are dynamic and

change over time in response to changes in internal

or external factors (Ansoff 1979).

Taken together, these theoretical perspectives and

related research streams emphasize the primacy of

organizational goals in directing f‌irm behavior and

performance, as well as the complexity arising from

their multidimensional and dynamic nature. Because

organizational goals are inherently complex, it is

not surprising that the measurement of organiza-

tional goals remains an important and still largely

unresolved issue for both management research

and practice (Cameron 2010; Richard et al. 2009;

Venkatraman and Ramanujam 1986). In this regard,

Venkatraman and Ramanujam (1986) note that

organizations have both f‌inancial and operational

goals and highlight how measurement of organi-

zational goals is constrained by the availability of

data, especially when it comes to operational goals,

for which primary sources of data are needed. In

practice, the ‘balanced scorecard’ approach (Kaplan

and Norton 2007) has long been used to address the

complexity of dealing with multiple goals. Although

the balanced scorecard provides a simplif‌ied tool to

manage multiple organizational goals, this approach

C2018 British Academy of Management and John Wiley & Sons Ltd.