It made its warning jointly with think tank British Future.
Figures due to be published on Thursday are expected to show net migration is more than three times higher than the government’s target.
The Home Office says it remains committed to reducing the net total to the tens of thousands.
The Institute of Directors and British Future say radical policies to prevent migrants coming to the UK will damage the economy.
The two groups are calling for a “comprehensive immigration review” to establish what policies could be put in place to achieve the tens of thousands target, and what their impact would be on the UK’s economy, culture and society.