Goal Hierarchies: Understanding Sub‐Goal and Primary Goal Interdependency

There is increased research on how organizations respond to performance feedback on multiple goals. Most of it considers goals that have ambiguous ranking and thus differs from goal hierarchies with sub‐goals that are instrumental for accomplishing a primary goal. We develop theory on how goal hierarchies lead to primary goal and sub‐goal interactions influencing organizational decision‐making. We show that sub‐goals are important because they are temporally prior and instrumental for primary goals, making organizational responses to sub‐goals and primary goal interdependent in interesting ways. Empirically, we demonstrate a more sophisticated approach to multiple goals than earlier work suggests. This advances the behavioural theory of the firm, and supports and refines key assumptions for organizational design and organizational economics, encouraging further research on the role of goal structures and incentive schemes. Our theory and findings call for increased consideration of the March and Simon's (1958) hierarchical goals’ model in management research.