Stretch goals can be terribly demotivating:When stretch goals seem overwhelming and unattainable, they sap employees' intrinsic motivation. The enormity of the problem causes people to freeze up, and the extrinsic motivator of money crowds out the intrinsic motivators of learning and growth.
Stretch goals have a dangerous tendency to foster unethical behavior:In the early 1990s, Sears gave a sales quota of $147 per hour to its auto repair staff. Faced with this target, the staff overcharged for work and performed unnecessary repairs. Sears' Chairman at the time, Ed Brennan, acknowledged that the stretch goal gave employees a powerful incentive to deceive customers.
Finally, stretch goals can also — tragically — lead to excessive risk taking.Enron rewarded its executives with large bonuses for meeting specific revenue goals, irrespective of the profitability or the riskiness of the moves. Although the final book hasn't been written on sub-prime mortgages and the ensuing banking crisis, we do know that stretch goals played a large role in putting the investment banks in serious jeopardy.