GOAL SETTING: ITS SYSTEMIC BEHAVIORAL IMPACT – CHAPTER – 02

***Continued from Chapter 01 (Covered previously: Case Studies on Goals going Awry, Inappropriate Calibration of Goals, Impact of Time Horizon on Goals,)

Link to Chapter 01:

GOAL SETTING: ITS SYSTEMIC BEHAVIORAL IMPACT – CHAPTER 01

Goals Becoming Too Challenging

Proponents of goal setting claim that a positive linear relationship exists between the difficulty of a goal and employee performance. Specifically, they argue that goals should be set at the most challenging level possible to inspire effort, commitment, and performance—but not so challenging that employees see no point in trying. This logic makes intuitive sense, yet stretch goals also cause serious side-effects like:-

Shifting Risk Attitudes:-> Goal-setting often distorts risk preferences. People motivated by specific and challenging goals adopt riskier strategies and choose riskier gambles than do those with less challenging or vague goals. Related literature has found that goals harm negotiation performance by increasing risky behavior. Negotiators with goals are more likely to reach an inefficient impasse than are negotiators who lack goals. A negotiator who has obtained concessions sufficient to reach their goal, will satisfies and accept the agreement on the table, even if the value maximizing strategy would be to continue the negotiation process. Clearly, in some domains, goal setting can significantly harm performance rather than promote better outcomes.

In the 1996 Mt.Everest disaster in which eight climbers died due to the decisions of the two team leaders is an example of destructive goal pursuit. On Mt. Everest, world-class high-altitude guides, Rob Hall and Scott Fischer, identified so closely with the goal of reaching the summit that they made risky decisions that led to their own and 6 of their clients’ deaths. Some warning signs of leaders who have become excessively fixated on goals may be:

Unethical Behavior:-> Goal setting has been promoted as a powerful motivational tool, but substantial evidence demonstrates that in addition to motivating constructive effort, goal setting can induce unethical behavior. Goal setting can promote two different types of such behavior:

First, when motivated by a goal, people may choose to use unethical methods to reach it. For example, at Sears (reference – case study from chapter 01), mechanics told customers that they needed unnecessary repairs and then performed and charged them for this unneeded work.

Second, goal setting can motivate people to misrepresent their performance level—in other words, to report that they met a goal when in fact they fell short. For example, in 1993, employees at Bausch and Lomb who were driven to reach sales targets reported sales that never took place. They falsified financial statements to meet earnings goals.

Goal setting, of course, is not the only cause of employee unethical behavior, but it is certainly an important, understudied ingredient. A number of factors serve as catalysts in the relationship between goal setting and cheating: lax oversight, financial incentives for meeting performance targets, and organizational cultures with a weak commitment to ethics.

The interplay between organizational culture and goal setting is particularly important. An ethical organizational culture can reign in the harmful effects of goal setting, but at the same time, the use of goals can influence organizational culture. Specifically, the use of goal setting, like “management by objectives,” creates a focus on ends rather than means. Goal setting impedes ethical decision making by making it harder for employees to recognize ethical issues and easier for them to rationalize unethical behavior.

Psychological Costs of Goal Failure:-> One problem embedded in stretch goals is the possibility that the goal may not be reached. In negotiations, for example, challenging goals can increase negotiation and task performance, but decrease satisfaction with high-quality outcomes. These decreases in satisfaction influence how people view themselves and have important consequences for future behavior. It was found that giving someone a challenging goal versus an easy goal on an attention task or an intelligence test improved performance, but left people questioning their concentration abilities and overall intelligence. These goal-induced reductions in self-efficacy can be highly detrimental, because perceptions of self-efficacy are a key predictor of task engagement, commitment, and effort.

Fostering  Collaboration and Learning in Goals

In order to adapt to a competitive landscape, organizations need employees who are able to learn and collaborate with their colleagues. Goals can inhibit both learning and cooperation.

Goals inhibit learning :->  When individuals face a complex task, specific and challenging goals may inhibit learning from experience and degrade performance. A person who is narrowly focused on a performance goal, will be less likely to try alternative methods that could help her learn how to perform a task. The narrow focus of specific goals can inspire performance but prevent learning.

“Learning goals” can be used in complex situations rather than “performance goals.” In practice, however, managers may have trouble determining when a task is complex enough to warrant a learning, rather than a performance goal. In many changing business environments, perhaps learning goals should be the norm. Even when tasks are complex enough to clearly warrant learning goals, managers face the challenge of identifying the specific, challenging goal levels for learning objectives.

Goals create a culture of competition :->  Organizations that rely heavily on goal setting may erode the foundation of cooperation that holds groups together. An exclusive focus on profit maximization can harm altruistic and other behavioral motives. Similarly, being too focused on achieving a specific goal may decrease extra-role behavior, such as helping coworkers. Goals may promote competition rather than cooperation and ultimately lower overall performance.

When Goals Harm Motivation Itself:-> As goal setting increases extrinsic motivation, it can harm intrinsic motivation – engaging in a task for its own sake. This problem is important, because managers are likely to over-value and over-use goals. Although people recognize the importance of intrinsic rewards in motivating themselves, people exaggerate the importance of extrinsic rewards in motivating others. In short, managers may think that others need to be motivated by specific and challenging goals far more often than they actually do. By setting goals, managers may create a hedonic treadmill in which employees are motivated by external means (goals, rewards, etc.) and not by the intrinsic value of the job itself.

Implementation and Calibration of Goals

Proponents of goal setting have long championed the simplicity of its implementation and the efficiency of its effects. In practice, however, setting goals is a challenging process, especially in novel settings.

Goal setting can become problematic when the same goal is applied to many different people. Given the variability of performance on any given task, any standard goal set for a group of people will vary in difficulty for individual members; thus, the goal will simultaneously be too easy for some and too difficult for others. Conversely, idiosyncratically tailoring goals to each person can lead to charges of unfairness. This has important implications, because employee perceptions of whether rewards fairly match effort and performance can be one of the best predictors of commitment and motivation.

When reaching pre-set goals matters more than absolute performance, self-interested individuals can strategically set (or guide their managers to set) easy-to-meet goals. By lowering the bar, they procure valuable rewards and accolades. Many company executives often choose to manage expectations rather than maximize earnings. In some cases, managers set a combination of goals that, in aggregate, appears rational, but is in fact not constructive. In reality, CEOs (and many Wall Street executives) face asymmetric rewards—a large bonus for meeting the goal in one year, but no fear of having to return a large bonus the following year for underperforming.

Harnessing the Power of Goals

Goals can inspire employees and improve performance as well. Just as doctors prescribe drugs selectively, mindful of interactions and adverse reactions, so too should managers carefully prescribe goals. To do so, managers must consider—and scholars must study—the complex interplay between goal setting and organizational contexts, as well as the need for safeguards and monitoring.

According to General Electric’s Steve Kerr, an expert in reward and measurement systems, “most organizations don’t have a clue how to manage ‘stretch goals’”. He advises managers to avoid setting goals that increase employee stress, to refrain from punishing failure, and to provide the tools people need to meet ambitious goals.

It’s one thing to know about goal setting, and how it can help us, but another entirely to know how to actually set goals and stick with them. Goal setting tools are a great way to help us set goals, keep track of, and stay focused on what we are trying to achieve. These tools can be informal, for instance:

There are several concepts and tools for Goal Setting. Which tool is right for us will depend on what our goals are, how long we want to take to achieve them, and whether it is an individual or group goal.

Here are some popular tools:

Content Curated By: Dr Shoury Kuttappa.

GOAL SETTING: ITS SYSTEMIC BEHAVIORAL IMPACT – CHAPTER 01

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 Iaccoca 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:-> 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. When quantity and quality goals are both difficult, people tend to sacrifice 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) Link to Chapter -02:

GOAL SETTING: ITS SYSTEMIC BEHAVIORAL IMPACT – CHAPTER – 02

Content Curated By: Dr Shoury Kuttappa.