What do multiple objectives really mean for performance? Empirical evidence from the French manufacturing sector

• Published date: 01 December 2020
• Author: Metin Sengul,Tomasz Obloj
• Date: 01 December 2020
• DOI: http://doi.org/10.1002/smj.3198

RESEARCH ARTICLE

What do multiple objectives really mean for

performance? Empirical evidence from the

French manufacturing sector

Tomasz Obloj

1

| Metin Sengul

2

1

HEC Paris, Jouy-en-Josas, France

2

Boston College, 140 Commonwealth

Avenue, Chestnut Hill, Massachusetts

Correspondence

Tomasz Obloj, HEC Paris, 1 rue de la

Liberation, 8351 Jouy-en-Josas, France.

Email: obloj@hec.fr

Abstract

Research Summary: We explore the performance

consequences of the simultaneous pursuit of multiple

objectives in organizations. Taking advantage of a

unique dataset covering both the objectives pursued

and performance outcomes, we test the hypothesis that

is the cornerstone of multiple objectives theory: perfor-

mance on a given metric increases when it is pursued

as an objective but decreases with the number of other

objectives pursued simultaneously. We find overall sup-

port for this hypothesis, which holds for most, but not

all, objectives. We further unpack the link between

multiplicity of objectives and performance, investigat-

ing the moderating effects of organization design

choices. This study suggests that multiple objectives

impose a cost on organizations, but also provide a ben-

efit of alleviating tradeoffs in achieving higher perfor-

mance in multiple dimensions.

Managerial Summary: Most organizations simulta-

neously follow multiple goals, rather than focus on a

single, well-defined objective. For example, manufactur-

ing firms often concurrently strive to decrease costs,

increase revenues, and enhance margins. We study the

consequences of such pursuit for firm performance. We

show that explicitly setting objectives plays an impor-

tant role in driving performance improvements. We

also show that performance on any given dimension

decreases with the number of other, simultaneously,

Received: 23 June 2019 Revised: 4 May 2020 Accepted: 12 May 2020 Published on: 16 August 2020

DOI: 10.1002/smj.3198

2518 © 2020 John Wiley & Sons, Ltd. Strat Mgmt J. 2020;41:2518–2547.wileyonlinelibrary.com/journal/smj

followed goals. This regular ity holds across di fferent

types of organizations, from simple to complex.

Finally, we show that setting goals in multiple

dimensions can play a beneficial role in forcing firms

to actively manage tradeoffs inherent in their strate-

gic choices. Our findings point to how managers

could balance the costs and benefits of multiple

objectives.

KEYWORDS

behavioral strategy, multiple objectives, organization design,

performance paradox

1|INTRODUCTION

Most modern organizations simultaneously pursue multiple objectives rather than adhere to

the normative prescription of single goal maximization.

1

Publicly traded firms are expected to

demonstrate short-term profitability and act in the best long-term interest of shareholders and

attend to other stakeholders and be good citizens (Margolis & Walsh, 2003). Hybrid organiza-

tions, which have witnessed an unprecedented increase in number over the past 30 years, pur-

sue a social mission while engaging in economic activities to sustain their operations (Battilana,

Sengul, Pache, & Model, 2015). Many research universities pursue an educational and scientific

mission while simultaneously maximizing licensing revenues from inventions (Shane &

Somaya, 2007). Even in small firms, the role of the CEO is “to manage multiple objectives

simultaneously”(Gilovich & Ross, 2016: 54). Indeed, there is now abundant evidence indicating

that the concurrent pursuit of several, and often conflicting, objectives is an organizational

norm, rather than an exception (Hu & Bettis, 2018; Meyer & Gupta, 1994; Unsworth, Yeo, &

Beck, 2014).

Interestingly, this empirical reality is in stark contrast to the normative prescriptions of sin-

gle goal maximization and thus presents a challenge for organizational researchers. This is

because the concurrent pursuit of more than one goal is theoretically intractable (Ethiraj &

Levinthal, 2009). The difficulty stems from the technical impossibility of maximizing in more

than one dimension. Unless objectives are perfectly correlated, the mapping from actions to

performance can become ambiguous, as can the actual meaning of performance, hence leaving

the decision criterion opaque. Jensen (2002: 238) firmly expressed reservations with theories

and management tools implying multiple goals in his influential critique of stakeholder theory

and the Balanced Scorecard approach, noting that simultaneous pursuit of multidimensional

goals must lead to “confusion and a lack of purpose,”leaving managers “with no way to make

reasoned decisions.”These arguments are echoed by Sundaram and Inkpen (2004) and others

in earlier and subsequent work.

Yet despite the importance of this theoretical debate and its clear managerial implications,

there is a remarkable dearth of empirical work linking the number and type of objectives

1

Throughout this article, we use the terms “objectives”and “goals”interchangeably.

OBLOJ AND SENGUL 2519