For decades, goal setting has been used as a tool for improving employee motivation and performance in organizations. Across hundreds of experiments, dozens of tasks, and thousands of people across four continents, the results are clear. Compared to vague, easy goals (e.g., “Do your best”), specific and challenging goals boost performance. Locke (1964) is credited with the very first Goal Setting Theory, where he focused on goal setting within the workplace.
He found that employees were motivated more by clearly set goals and actionable feedback to help them achieve those goals. Locke also found that motivation is key to achieving our goals, and we feel more motivated when we’re not 100% certain we can achieve the goal we’ve set for ourselves. Taking on challenges is highly motivational as it allows us to develop our skills, flex our problem-solving muscles, and gain a deeper sense of personal achievement.
But has the systematic harm caused by goal setting been largely ignored? When managers set targets for specific dimensions of a problem, they often fail to anticipate the broader results of their directives. Goals inform the individual about what behavior is valued and appropriate. The very presence of goals may lead employees to focus myopically on short-term gains and to lose sight of the potential devastating long-term effects on the organization.
Case Studies to Consider:
Consider Sears, Roebuck and Co.’s experience with goal setting in the early 1990’s. Sears set sales goals for its auto repair staff of $147/hour. This specific, challenging goal prompted staff to overcharge for work and to complete unnecessary repairs on a company-wide basis. Ultimately, Sears’ Chairman Edward Brennan acknowledged that goal setting had motivated Sears’ employees to deceive customers.
In the late 1990’s, specific, challenging goals fueled energy-trading company Enron’s rapid financial success. Enron’s incentive system was of paying a salesman a commission based on the volume of sales and letting him set the price of goods sold. Even during Enron’s final days, Enron executives were rewarded with large bonuses for meeting specific revenue goals. In sum, Enron executives were meeting their goals, but they were the wrong goals. By focusing on revenue rather than profit, Enron executives drove the company into the ground.
In the late 1960’s, the Ford Motor Company was losing market share to foreign competitors that were selling small, fuel-efficient cars. CEO Lee Iacocca announced the specific, challenging goal of producing a new car that would be “under 2000 pounds and under $2,000” and would be available for purchase in 1970. This goal, coupled with a tight deadline, meant that many levels of management signed off on unperformed safety checks to expedite the development of the car—the Ford Pinto. One omitted safety check concerned the fuel tank, which was located behind the rear axle in less than 10 inches of crush space.
Lawsuits later revealed what Ford should have corrected it in its design process: the Pinto could ignite upon impact. Investigations revealed that after Ford finally discovered the hazard, executives remained committed to their goal and instead of repairing the faulty design, calculated that the costs of lawsuits associated with Pinto fires (which involved 53 deaths and many injuries) would be less than the cost of fixing the design. In this case, the specific, challenging goals were met (speed to market, fuel efficiency, and cost) at the expense of other important features that were not specified (safety, ethical behavior, and company reputation).
As these disasters suggest, the harmful effects of goal setting have received far too little attention in the management literature. Although prior research has acknowledged “pitfalls” of goal setting, we argue that the harmful side effects of goal setting are far more serious and systematic than has been acknowledged.
Calibration Of Goals
Advocates of goal setting argue that for goals to be successful, they should be specific and challenging. Countless studies find that specific and challenging goals motivate performance far better than “do your best” kind of goals. According to these findings, specific goals provide clear, unambiguous, and objective means for evaluating employee performance. Specific goals focus people’s attention; lacking a specific goal, employee attention may be dispersed across too many possible objectives. In turn, because challenging goals, or “stretch” goals, create a discrepancy between one’s current and expected output, they motivate greater effort and persistence. However, here are what can cause disarray:
When Goals Are Too Specific:->
As research has shown, goals focus attention. Unfortunately, goals can focus attention so narrowly that people overlook other important features of a task (example – the Ford Motor Company Case). This focusing problem has broad application and direct relevance to goal setting.
When Goals Are Too Narrow:->
With goals, people narrow their focus. This intense focus can blind people to important issues that appear unrelated to their goal. Suppose that a university department bases tenure decisions primarily on the number of articles that professors publish. This goal will motivate professors to accomplish the narrow objective of publishing articles. Other important objectives, however, such as research impact, teaching, and service, may suffer. Consistent with the classic notion that you get what you reward, goal setting may cause people to ignore important dimensions of performance that are not specified by the goal setting system.
When Goals Are Too Many:->
A related problem occurs when employees pursue multiple goals at one time. People with multiple goals are prone to concentrate on only one goal. Related research suggests that some types of goals are more likely to be ignored than others. It is also shown in research that when quantity and quality goals were both difficult, people sacrificed quality to meet the quantity goals. Goals those are easier to achieve and measure (such as quantity) may be given more attention than other goals (such as quality) in a multi-goal situation.
Impact of Time Horizon on Goals
Even if goals are set on the right attribute, the time horizon may be inappropriate. For instance, goals that emphasize immediate performance (e.g., this quarter’s profits) prompt managers to engage in myopic, short-term behavior that harms the organization in the long run. The efforts to meet short-term targets occur at the expense of long-term growth. Some companies are learning from these mistakes; Coca Cola announced in 2002 that is would cease issuing quarterly earnings guidance and provide more information about progress on meeting long-term objectives.
The time horizon problem is related to the notion that it can lead people to perceive their goals as ceilings rather than floors for performance. For instance, a salesperson, after meeting her monthly sales quota, may spend the rest of the month playing golf rather than working on new sales leads.
An excellent example of this problem comes from a study of New York City cab drivers. This study answers the age-old question of why it is so hard to get a cab on a rainy day. Most people blame demand: when it is raining, more people hail cabs than when the weather is clear. But as it turns out, supply is another important culprit. As a day progresses, cabs start disappearing more quickly from Manhattan streets on rainy days than on sunny days. Why? Because of the specific, daily goals that most cab drivers set: a goal to earn double the amount it costs them to rent out their cabs for a 12-hour shift. On rainy days, cabbies make money more quickly than on sunny days (because demand is indeed higher), hit their daily goal sooner, and then they go home (the problem of goals as ceilings).
This finding flies in the face of the economic tenet of wage elasticity, which predicts that people should work more hours on days when they can earn more money and less on days when they earn less. If NYC taxi drivers used a longer time horizon (perhaps weekly or monthly), kept track of indicators of increased demand (e.g., rain or special events), and ignored their typical daily goal, they could increase their overall wages, decrease the overall time they spend working, and improve the welfare of drenched New Yorkers.
***To be continued in Chapter 02 (Goals Becoming too Challenging, Fostering Collaboration and Learning in Goals, Implementation and Calibration of Goals, Harnessing the Power of Goals, Goal Setting Tools, Emotional Intelligence and Transformational Leader Leaders)
Link to CHAPTER - 02:
Content Curated By: Dr Shoury Kuttappa.
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