Removing the goal posts

A new survey from the Havard Business School suggests that individual goal setting in a corporate environment can produce the kinds of risky and unethical behaviour that led to the collapse of Enron.

Over the last few decades, goal-setting has become an entrenched part of corporate culture. According to the a long line of management gurus and performance coaches, goals are most effective when they are specific and measurable. Goals, they say, should be challenging, yet realistic, and they should have a deadline attached. So popular have goals become that they often seem to have almost magical quality. Just write down your goals, and success is sure to follow.

Yet a recent working paper titled Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal Setting by four researchers at the Harvard Business School has linked the popular motivational tool with a host of problems, including promoting selective focus among employees, encouraging a short-term outlook and creating a more individualistic work culture. More seriously, the researchers implicate the use of goals in risky and unethical behaviour, including the kind of practices that led to the collapse of Enron.

In one study reviewed in the working paper, researchers asked two groups of students to proofread a paragraph of text that they were told would go in a brochure promoting their business college. The paragraph contained both errors of fact and grammatical errors.

One group of students was asked to correct either grammar or content, while another group was instructed to simply ‘do your best’. Students who were given the general goal to do their best performed better in finding both content and grammatical errors compared to those students who were charged with looking for specific kinds of errors.

Other studies reviewed by the Harvard Business School researchers examined goals that focus on quality and those that focus on quantity. The studies suggest that when employees are given both goals linked to increasing quality and goals associated with increasing quantity, they will opt for quantity at the expense of quality. The reason is that quantity goals are easier to measure than those defined by quality.

The Harvard researchers also argue that goals can harm an organisation’s cohesiveness by creating a self-interested work culture. Employees whose performance is tied to the achievement of specific goals tend to focus on their own needs, rather than engaging in altruistic behaviour. As the authors of the review note that ‘being too focused on achieving a specific goal may decrease extra-role behaviour, such as helping co-workers’.

Setting deadlines for goals can also encourage a short-term outlook. One study examined by the authors of the Harvard Business School review found that while companies which issue regular reports tend to equal or better market expectations, they also tended to invest less in research and development.

Setting lots of short-term goals might be a good thing if you want to meet or surpass current expectations, but it may be a liability when business conditions change. This is particularly pertinent to the current business environment. Laying off staff in order to meet profit targets or because they didn’t reach performance targets may do more long-term harm than good, damaging staff morale, destroying corporate memory or losing talent to the competition.s

One truism of goal-setting is that goals ought to be ambitious so as to challenge employees to extend their abilities. It sounds fine in theory, but the downside is that it can encourage employees to engage in risky, and sometimes unethical behaviour.

In one example cited by the authors of the Harvard Business School working paper, employees at a disk drive manufacturer called Miniscribe sent customers bricks rather than the IT hardware they’d ordered. The reason? The company had set ambitious shipping targets for its employees which they met by sending bricks through the mail.

Similarly, in 1993 employees at Bausch and Lomb fabricated financial statements in order to meet sales targets. The authors of the Harvard Business School paper argue that ‘aggressive goal setting within an organisation will foster an organisational climate ripe for unethical behaviour’.

The authors even link the collapse of Enron to a management culture obsessed with the pursuit of goals. Enron rewarded salespeople for the volume of their sales, while leaving them free to set the price of the goods. According to the authors by ‘focusing on revenue rather than profit, Enron executives drove the company into the ground’.

Surely, though, most of these problems are not with goal setting per se but in how goals are implemented. The solution might then lie in further refinements to the goals and working out appropriate performance measures.

The authors of the Harvard Business School, however, are not optimistic. They ‘urge managers to think carefully about whether goals are necessary and, if so, about how to implement a goal-setting system.’ More specifically, they suggest that goals should only be used sparingly in situations where the outcome is clear and fairly easy to achieve. Goals, they say, are inappropriate in complex situations where the outcomes are unclear and require large investments of an individual’s self.

Or, put more bluntly, goals are unsuitable for most areas of modern business life.

Christopher Scanlon teaches in the journalism program at La Trobe University and is online editor of www.arena.org.au.

Related Articles