Bob Sutton has a great blog post at Harvard Business Review this week. It makes a subtle but very important point.
There is a lot of research (such as the work of Locke and Latham that he cites in the post) that show the advantages of setting goals that I refer to as Cinderella goals. They are challenging enough to require hard work, focus, creativity, etc. But not so challenging that you get frustrated of give up. You have to believe that they are attainable.
Locke and Latham's research describes all the advantages of these goals. But Bob makes an important point. You can't focus on these on a day-to-day basis because they tend to have more of a long term focus and because you would burn out if you try. So he talks about balancing them out with some short term goals that are a bit less challenging.
When you hit these short term goals, you feel good, motivated to start on the next one, perhaps tangibly rewarded (i.e. by a bonus from mgmt). Long terms effects of regular goal achievement are less stress, more life (and or job) satisfaction, and general happiness.
I am certainly not suggesting to give up the Big Hairy Audacious Goals (btw this term was coined by Jim Collins in "Good to Great"). But balance is important.