Goals Gone Wild

Posted by: Jena McGregor on April 7, 2009

One need look no further than the current financial crisis to see what disastrous effects can occur when employees are too focused on meeting “stretch” goals—and the outsized compensation that often comes with it. Whether it was underwriting gobs of subprime loans, trading piles of securitized mortgages, or “insuring” ever more toxic debt, managers the world over were paid to try and meet extraordinary results.

While the practice of setting difficult-to-reach goals is so common few question it, it is significant management problem, according to researchers writing in the February-April issue of the Academy of Management Perspectives and described in this Knowledge@Wharton issue. Letting goals run wild, write Maurice Schweitzer of the Wharton School, Lisa Ordonez of the University of Arizona, Adam Galinsky of Northwestern University and Max Bazerman of Harvard Business School, has been an issue at any number of troubled firms, from General Motors to Enron to Fannie Mae and Freddie Mac.

For example, the researchers note, it wasn’t too long ago that GM executives wore buttons with the number “29” as a constant reminder of the company’s lofty goal of reaching U.S. market share of that level. Six years later, the researchers comment, GM’s U.S. market share is below 20%, and the company faces bankruptcy at least in part due to too much emphasis on that goal. “In GM’s case the relentless pursuit of market share came at the expense of profitability,” Schweitzer noted.

The professors contend that goal setting “has been promoted as a panacea for improving employee motivation and performance” for decades but argue that it has now become “overprescribed.” Too much emphasis on goal-setting, they argue, could cause “systematic problems”—some might say they already have—thanks to a narrower focus, more risk-taking, unethical behavior, and decreased cooperation. Lowered “intrinsic” motivation is another factor—the authors believe not enough credit is given to people’s inherent desire to do a good job. We are motivated by more than money, after all.

So should executives pass up on goal-setting altogether? No, but before setting any, the researchers suggest managers ask themselves the following 10 questions (after the jump…)

1) Are the goals too specific? They should be comprehensive and include all of the critical components for firm success.

2) Are the goals too challenging? Provide skills and training, and avoid harsh punishment for failure.

3) Who sets the goals? The process should be transparent and involve more than one person or unit.

4) Is the time horizon appropriate? Short-term efforts to reach the goal should not harm investment in long-term outcomes.

5) How might goals influence risk-raking? Be sure to articulate acceptable levels of risk.

6) How might goals motivate unethical behavior? Multiple safeguards may be necessary.

7) Can goals be tailored for individual abilities and circumstances while preserving fairness? Strive to set goals that use common standards but also account for individual variation.

8) How will goals influence organizational culture? Consider setting team-based rather than individual goals.

9) Are individuals intrinsically motivated? Avoid setting goals when intrinsic motivation is high.

10) What type of goal is more appropriate, performance or learning? In complex, changing environments, learning goals may be more effective than performance goals.

Reader Comments

Forrest Breyfogle

April 7, 2009 10:20 PM

Dr. Lloyd Nelson in Edwards Deming book "Out of the Crisis" stated that "If you can improve productivity, or sales, or quality, or anything else, by (e.g.,) five percent next year without a rational plan for improvement, then why were you not doing it last year?"

If we consider how executives and others are very often given recognition and rewarded on meeting "Y" response output goals without consideration that improvements need to be made to the overall system in order to achieve long-lasting healthy improved performance. A management style of variance to goals can be considered "management by hope," and can lead to playing games with the numbers that result in very destructive behaviors to meet short-term objectives (i.e., Enron effect).

Also, it only seems natural to set goals throughout the organization; i.e., every portion of the business needs to have a goal for improvement. But is this the best policy, remembering that the process needs to change for every improvement goal that is set? What if you cannot sell all widgets that you have the capacity to produce? In this case, it would be more beneficial to spend effort improving the marketing and the sales process then improving efficiencies in manufacturing.

Doesn't it seem that it would be beneficial for organizations to reinvent their business systems so that there is an integration of scorecards, strategic planning, business improvement, and control that leads to the 3 Rs of business; i.e., everyone does the Right things, and doing them Right, at the Right time.

Dan

April 8, 2009 11:23 AM

If you'd like a tool for setting your goals, you can use this web application:

http://www.Gtdagenda.com

You can use it to manage your goals, projects and tasks, set next actions and contexts, use checklists, schedules and a calendar.
A Vision Wall (inspiring images attached to yor goals) is available too.
Works on mobile.

VP

April 10, 2009 9:27 AM

Could it perhaps be not the goals that are the problem but the managers who are implementing them?

Also, if the employees were not wisely vetted through the hiring process, maybe they weren't capable of seeing the trees for the forest...?

(Great article, by the way!)

VP
www.verifyprotect.com

Josh

May 7, 2009 4:31 PM

People will perform better when they are committed to achieve certain goals. Goal commitment is dependent on:
1. The importance of the expected outcomes of goal attainment and;
2. Self-efficacy - one's belief that they are able to achieve the goals;
3. Commitment to others - promises or engagements to others can strongly improve commitment

I really try to keep my goals as realistic as possible and simple. Simple is the way to go, to keep you aware of what your tasks really entail. But I do agree that “intrinsic” motivation is another big factor in employee motivation. I do believe that the employees need to want to do a good job for it to be so.
For more tips and tricks check out my Life Coach Rob Scott who has some really great insights.

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