In these first months of the year many teams in many firms have gone or are going through annual interviews and goals setting for the year 2015.
Last week I read an interesting Schumpeter column in The Economist, “The quantified serf: Management by goal-setting is making a comeback, its flaws supposedly fixed”.
The article mainly covered two issues: one was the newest trend in goal-setting, “quantified work”, as promoted by BetterWorks, whereby employees collaborate in setting objectives for peers. This apparently improves performance and transparency. The article cautions, however, that rewards should not be linked to these goals and that an attainment of 60-70% of goals set in this way should be viewed as normal rather than failure.
The second issue covered by the article was side-effects of goal-setting. The article introduced the paper “Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal Setting” [PDF, 500KB] by Lisa D. Ordóñez, Maurice E. Schweitzer, Adam D. Galinsky and Max H. Bazerman. In this post I wanted to comment on this paper.
Published in 2009, the paper makes a review of literature on goal-setting and even if admitting that studies have demonstrated specific and challenging goals can improve performance, it concludes that:
“For decades, scholars have prescribed goal setting as an all-purpose remedy for employee motivation. Rather than dispensing goal setting as a benign, over-the-counter treatment for students of management, experts need to conceptualize goal setting as a prescription strength medication that requires careful dosing, consideration of harmful side effects, and close supervision. […]”
Before reaching to that conclusion the paper examines several aspects of goals and why they may produce harmful side effects; to name a few:
- When goals are too specific… people overlook other important features of a task. As an example the authors provide the case of the Ford Pinto, about which I wrote a post in the blog long ago.
- When there are too many goals… individuals are prone to concentrate on only one goal.
- When the time horizon is inappropriate… may harm the organization in the long run. Think of quarterly reports and companies trying to beat analysts’ estimates or their own guidance. That is why Coca Cola ceased to provide quarterly guidance back in 2002.
- When goals are too challenging… they may shift risk attitudes, promote unethical behaviour. An example given describes how Sears’ automotive unit set a target of fee to be charged to customers. This triggered that employees started charging for unnecessary repairs to customers to meet the goals!
- When goals are complex, specific, challenging… they may inhibit learning.
- Goals may create a culture of competition instead of cooperation.
- Goal setting increases extrinsic motivation… and thus can harm intrinsic motivation.
Linked to the message given in the conclusion (“experts need to conceptualize goal setting as a prescription strength medication that requires careful dosing, consideration of harmful side effects, and close supervision”), the authors also propose the following warning signal and a check list to be used when setting goals.