Business: when goals attack!
We can probably agree that it’s good to have goals. In business, especially, it’s good to know where you’re going and to have some mechanisms that help you chart and evaluate your progress.
Increasingly, though, we’re presented with more and more evidence suggesting that our goal-setting can easily go awry, and with dramatically counter-productive results. If you’ve read Steven Levitt and Stephen Dubner’s outstanding Freakonomics you probably recall their investigation of teacher-fueled cheating on standardized tests, for instance. While most of would agree in principle that our educational system should adhere to the highest standards possible, it’s clear that something went badly wrong in that system. If you know any teachers, you may also have heard (in tones ranging from quiet exasperation to unbridled rage) how goal-setting is failing in other places, as well, and for many of the same reasons.
We recently had a similar case in a middle school near where I live (Denver North Metro), when “the principal allegedly told teachers what would appear on the [Colorado Student Assessment Program] exam ahead of time.” Not only are the scores all being tossed, but the last I heard they weren’t going to be allowed to make the test up, which I believe means a sizable ding in the school’s all-important ranking profile.
Now arrives a new, expansive study courtesy of the Harvard Business School’s Working Knowledge series that comes very close to suggesting that formal goals are bad, period. In “Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal Setting,” Lisa D. Ordóñez, Maurice E. Schweitzer, Adam D. Galinsky and Max H. Bazerman conclude that
- The harmful side effects of goal setting are far more serious and systematic than prior work has acknowledged.
- Goal setting harms organizations in systematic and predictable ways.
- The use of goal setting can degrade employee performance, shift focus away from important but non-specified goals, harm interpersonal relationships, corrode organizational culture, and motivate risky and unethical behaviors.
- In many situations, the damaging effects of goal setting outweigh its benefits.
- Managers should ask specific questions to ascertain whether the harmful effects of goal setting outweigh the potential benefits.
The researchers cite dozens of studies and articulate a wide range of things that can go wrong, including:
- Goals can be too specific, inadvertently “focusing attention so narrowly that people overlook other important features of a task.”
- Goals can be too narrow, blinding people to “important issues that appear unrelated to their goal… The tendency to focus too narrowly on goals is compounded when managers chart the wrong course by setting the wrong goal (e.g.,
- setting revenue rather than profit goals at Enron).”
- There can be too many goals. “…individuals 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.”
- Goals can be set along inappropriate time horizons. “For example, 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.” If you’ve been in corporate America for any length of time, you’ve probably seen this one up close.
- Goals that are too challenging promote risk taking and distorts risk preferences. “…people motivated by specific, challenging goals adopt riskier strategies and choose riskier gambles than do those with less challenging or vague goals.”
- Goals can produce unethical behavior. Cases at Sears Automotive, Miniscribe and Bausch and Lomb illustrate how challenging goals can motivate employees to engage in a range of unethical behaviors. The education examples noted earlier provide further examples.
- Goal failure can produce dissatisfaction and other adverse psychological consequences. Failures “influence how people view themselves and have important consequences for future behavior… 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.”
- Goals inhibit learning. When individuals face a complex task, specific, challenging goals may inhibit learning from experience and degrade performance compared to exhortations to “do your best”… An individual 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.”
- Goals create a culture of competition. “Organizations that rely heavily on goal setting may erode the foundation of cooperation that holds groups together… 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.”
- Goals can harm motivation itself. “As goal setting increases extrinsic motivation, it can harm intrinsic motivation – engaging in a task for its own sake. In short, managers may think that others need to be motivated by specific, challenging goals far more often than they actually do.”
- Goals must be properly calibrated. “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 individual 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.”
Cases, research and examples abound, and at the very least the shrewd manager will likely come away thinking more critically about his or her organization’s approach to goal-setting.
Unfortunately, I’ve seen examples of most of this in organizations I’ve worked in through the years, and you probably have, too. I have to admit that some of what the authors describe hits a little too close to home. Take stretch goals, for instance. Set properly they’ve motivated me (and those I’ve worked with) to really give our best – more than our best, if that’s possible – and in these cases the results have been impressive. But I’ve also had stretch goals set for me that were, by any reasonable measure, unattainable. In those cases it became clear that a goal that was too ambitious was operationally identical to no goal at all – except that “no goal at all” didn’t breed cynicism among the team.
I’ve also seen goals foster unethical behavior. When I was just out of college I worked in a restaurant waiting and bartending (and, for a few months, supervising a 50-person wait staff). This restaurant, which was part of a mid-sized chain, periodically held sales contests and set suggestive selling quotas to promote certain products and drive up average ticket values (premium liquor, higher-margin entrees, appetizers, desserts, etc.) – in principle, an excellent idea. But it didn’t take long for people to start figuring ways of gaming the system.
Here’s an example. In one case we had a category of rib combo plates they wanted us to push. Customers could also simply order the ribs, which were very popular (one of the restaurant’s flagship items, in fact), but these orders didn’t count toward the quota. Just the combos. So one waiter, when a customer would order ribs, would punch in a rib combo with a “hold” message for the kitchen. He’d worked it out with the head line cook so that when a rib order came in with a hold, it meant he wanted the rib combo. In the system, he’d officially chalked up another coveted combo sale, although in reality he’d done nothing of the sort.
It goes without saying that this enterprising and creative waiter did quite well against his targets. The store itself did well, too. See, in addition to the individual goals, the stores were facing collective goals along the same set of targets. The managers knew what was going on and didn’t seem to care – the cheating was to their advantage, as well.
But the waiter didn’t sell more combos, and my guess is that, as news of his strategy got around and others began imitating him, it played havoc with the store’s inventory reporting. That is, they had a lot more chicken on hand, and fewer ribs, than the system said they did. In the end, the restaurant may have sold a few more combo platters, but to what end?
What was even worse for me personally was that I was playing the game straight up. I was a good suggestive salesman and felt no need to cheat. But others saw my numbers (especially in the premium liquor category, where I excelled) and assumed I was gaming, too. This did little for my morale and even less for my relationships with my co-workers – and make no mistake, waiting is a team sport.
The authors don’t go so far as to recommend doing away with goals, of course, but the do offer some helpful and very specific advice for businesses looking to maximize their goal-setting processes. In a nutshell, they encourage companies to ask ten basic questions:
- Are the goals too specific?
- Are the goals too challenging?
- Who sets the goals?
- Is the time horizon appropriate?
- How might goals influence risk taking?
- How might goals motivate unethical behavior?
- Can goals be idiosyncratically tailored for individual abilities and circumstances while preserving fairness?
- How will goals influence organizational culture?
- Are individuals intrinsically motivated?
- Consider the ultimate goals of the organization and what type of goal (performance or learning) is most appropriate?
Ordóñez et al do a thorough job with their research, and regardless of what conclusions you may reach about how well your organization is doing with its goal-setting, this study is well worth the read.
Good post. I do disagree with your take on “Freakonomics” but that’s just a matter of personal preference. You might to look at my friend Tyler Cowen’s book “Discover Your Inner Economist.” This book is along the same vein, but Cowen is a bit more scientific and does not stretch things like Levitt and Dubner did in Freakonomics when they correlated abortion with the crime rate.
Goals can be really dangerous. I have a friend who is a fellow speculator who set lofty performance goals for himself and when he couldn’t meet the goals, he engaged in riskier and riskier trades. He’s not a speculator anymore. I have a simple, yet elegant goal. I want to make money three out of five trading days. Meeting that goal will provide amply for me and mine. Perhaps simpler is better.
Jeff: Thanks for the Cowen rec.
I’m not 100% sure what Levitt’s data prove and what they suggest and what they merely open up for conjecture. He’s writing for a popular audience, which mitigates against a lot of scientific depth. Not only that, this is economic analysis, which may be statistical, but it’s hardly science. The data presented are certainly in accord with his conclusions, although that’s hardly definitive.
I think his analysis on other subjects (like the cheating teachers, which I’d bet my life on being accurate, and the sumo case) is so strong that it lends credibility to his speculations elsewhere – for better or worse.
BTW, I used to know Dubner a little. He was in a band called The Right Profile with a guy named Jeff Foster – see today’s SVR for more on where he is these days. RP was fucking amazing – one of the two or three best bands I’ve ever seen that didn’t “make it.”
Nice take on this, Sam. I don’t agree much with the recipe for fixing goal-setting, though. God knows how many design and/or training sessions I’ve run on goal-setting that were designed specifically to avoid mistakes like these. In the end, the same mistakes were being made over and over and over anyway.
My recipe for fixing the issue would be setting up dynamic feedback loops to find and fix the bad goals as they need to be fixed.
There’s going to be a follow-up to this post when I get the time. The conclusion won’t surprise you – the key has a lot to do with the intelligence and sophistication of those in charge. All the formulae in the world can’t save a dim manager, and goals are like numbers in that they become crutches for those who aren’t very talented.
BTW, I’d be eternally grateful if you’d also post this comment over at the Exchange.