Hundreds of studies conducted in numerous countries and contexts have consistently demonstrated that setting specific, challenging goals can powerfully drive behaviour and boost performance.

The authors of the article, however, contend that the beneficial effects of goal setting have been overstated and that the systemic harm caused by goal setting has been largely ignored.

They outline various problems associated with goal setting which leads them to conclude that goal setting should be prescribed selectively, presented with a warning label of its harmful side effects and closely monitored.

Problem 1: Narrow Goals Which Neglect Non Goal Areas

Advocates of goal setting argue that specific goals provide clear, unambiguous and objective means for evaluating employee performance. Specific goals focus peoples’ attention while “stretch” goals motivate greater effort and persistence by creating a discrepancy between ones current and expected output.

The following problems however arise from goals which are specific and challenging:

-       Goals can focus attention so narrowly that people overlook other important features of the task. This was the case when the CEO of Ford Motor company in the 1960s set a specific and challenging goal of producing a new car that would be “under 2000 pounds and under $2000”. The goal was met in the form of the ford Pinto (speed to market, fuel efficiency, and cost) at the expense of other important features which were not specified (safety, ethical behaviour and company reputation).

-       A specific goal can lead employees to focus myopically on short term gains and to lose sight of the potential devastating long term effects on the organisation. In the late 1990s Enron executives were rewarded with large bonuses for meeting specific revenue goals. By focusing on revenue, rather than on profit, Enron executives drove the company into the ground.

-       When employees pursue multiple goals at the same time they often end up sacrificing some goals at the expense of other goals. Gilliland and Landis (1992) in a stock selection task, found that people gave more attention to goals which were easier to achieve and measure (such as quantity) rather than other goals (such as quality) in a multi-goal situation.

-       Goals can lead people to perceive their goals as ceilings rather than floors for performance. For example, sales people who tend to slack off for the remainder of the month after meeting their monthly sales quota.

Problem 2: Distorted Risk Preferences

Research has shown that people motivated by specific, challenging goals adopt riskier strategies and choose riskier gambles than do those with less challenging or vague goals.

In 1976 the chairman of Continental Illinois Bank set a goal that within five years the bank’s lending would match that of any other bank. To meet this goal the bank shifted its strategy from conservative, corporate financing towards the aggressive pursuit of borrowers, going so far as to invest in some very risky loans. It was following massive loan defaults, that the government had to bail out the bank.

On Mt Everest in 1996, 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 which led to their own and six of their clients’ death.

Problem 3: Unethical Behaviour

There is substantial evidence to show that goal setting can induce unethical behaviour. First, when motivated by a goal people may use unethical means to achieve it. In order for Sears auto repair staff to achieve a goal of 147/hour in 1990s, customers were both overcharged for work and charged for completely unnecessary repairs on a country wide basis.

Secondly, goal setting can motivate people to misrepresent their performance level. For example, to people reporting sales that never took place or to bill for hours not worked.

A number of factors serve as catalysts in the relationship between goal setting and cheating: lax oversight, financial incentives for meeting targets and an organisational culture with a weak commitment to ethics.

Problem 4: Inhibit Learning and Cooperation

The narrow focus on specific goals can inspire performance but prevent learning (Locke and Latham 2002).

Goals may also promote competition rather than cooperation. Specifically goals may decrease extra-role behaviour, such as helping co-workers, and can harm concern for more altruistic behavioural motives.

Problem 5: Goals Harm Motivation Itself

As goal setting increases extrinsic motivation, it can harm intrinsic motivation – engaging in a task for its own sake. According to Heath (1999) people recognise the importance of intrinsic rewards in motivating themselves, but exaggerate the importance of extrinsic rewards in motivating others. Hence managers generally both over value and over use goals.

Problem 6: Setting the “right” Goal

Any standard goal set for a group of people will vary in difficulty for individual members; it will simultaneously be too easy for some and too difficult for others.

Conversely tailoring goals to each individual can lead to charges of unfairness. Both the same goals for all and idiosyncratic goals can lead to problems.

When rewards are linked to goal achievement rather than absolute performance, individuals can negotiate easy-to-meet goals for themselves in order to procure rewards for themselves.

For all these reasons, the authors recommend that at a minimum managers who use goals, do so with great caution.

They provide a useful checklist for managers to consider when setting goals.

CHECKLIST FOR GOAL SETTING

1. Are the goals too specific?

Narrow goals can blind people to important aspects of a problem. Be sure that goals are comprehensive and include all of the critical components for firm success (e.g., quantity and quality).

1. Are the goals too challenging?

What will happen if goals are not met? How will individual employees and outcomes be evaluated? Will failure harm motivation and self-efficacy?

Provide skills and training to enable employees to reach goals. Avoid harsh punishment for failure to reach a goal.

1. Who sets the goals?

People will become more committed to goals they help to set. At the same time, people may be tempted to set easy to reach goals.

1. Is the time horizon appropriate?

Be sure that short-term efforts to reach a goal do not harm investment in long-term outcomes. For example, consider eliminating quarterly reports as Coca Cola did.

1. How might goals influence risk taking?

Be sure to articulate acceptable levels of risk.

1. How might goals motivate unethical behaviour?

Goals narrow focus, such that employees may be less likely to recognize ethical issues. Goals also induce employees to rationalize their unethical behaviour and can corrupt organizational cultures. Multiple safeguards may be necessary to ensure ethical behaviour while attaining goals (e.g., leaders as exemplars of ethical behaviour, making the costs of cheating far greater than the benefit, strong oversight).

1. Can goals be idiosyncratically tailored for individual abilities and circumstances while preserving fairness?

Strive to set goals that use common standards and account for individual variation.

1. How will goals influence organizational culture?

If cooperation is essential, consider setting team-based rather than individual goals.

1. Are individuals intrinsically motivated?

Assess intrinsic motivation and recognize that goals can curtail intrinsic motivation.

1. Consider the ultimate goals of the organization and what type of goal (performance or learning) is most appropriate?

In complex, changing environments learning goals may be more effective.