The Dark Side of Goal Setting

The Dark Side of Goal Setting

I’m a big fan of goal setting. Hundreds of studies conducted in numerous countries and contexts have demonstrated that setting goals can be a powerful driver of behavior and performance. I’ve written a guide on how to set a BHAG (Big Hairy Audacious Goal) for your organization.

However, a Harvard study suggests that whilst goal setting has many beneficial effects, there is a potential for significant side-effects if goals are not well thought through.

According to the authors, “Rather than dispensing goal setting as a benign, over-the-counter treatment for motivation, managers need to conceptualize goal setting as a prescription-strength medication that requires careful dosing, consideration of harmful side effects, and close supervision. We offer a warning label to accompany the practice of setting goals.”

They list some of the unintended side effects of goal setting as being:

  • A rise in unethical behavior in order to achieve goals
  • Unanticipated behaviors
  • Non-measured areas get neglected
  • Corrosion of organizational culture and reduced teamwork
  • Reduced intrinsic motivation

Let’s break these problem areas down to look at what the research found:

Goals too specific.

Goals tell people what is important, and where they need to focus their time and attention. Focus can be a good thing, but care needs to be taken that this does not blinker people to the wider consequences.

For example, with publicly listed companies many managers are rated on their ability to meet quarterly targets. This can lead to them focusing myopically on pumping up short-term gains while reducing investment in research & development, or failing to make key strategic moves that may take many years to produce measurable results. Their effort to meet short-term targets can occur at the expense of long-term industry success.

Too many goals.

When individuals have multiple goals, some goals are more likely to be ignored. For example, when a person has both quantity and quality goals and both goals are equally difficult, people will tend to sacrifice quality in order to meet their quantity goals.

In this article, How to Identify Your Metrics (Key Performance Indicators) I recommend that clients whittle down their measures to 4 to 6 Metrics per functional area at most, and likewise for each individual role.

Goals too challenging.

Many proponents of goal setting claim that a positive linear relationship exists between the difficulty of a goal and employee performance. 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 setting overly aggressive stretch goals can cause serious side-effects.

Some examples documented in the research include:

  • Continental Illinois Bank made risky loans to people with bad credit ratings to meet their monthly sales quota, causing the bank’s collapse
  • Auto mechanics at Sears overcharged customers or charged for unnecessary repairs to meet hourly revenue targets
  • Automobile manufacturer Ford, rushing to meet a deadline to launch a new model, sped up production, only to face lawsuits due to product defects and safety issues later on
  • Enron’s sales reps were incentivized on the volume of revenue that they generated, and not whether the actual trades were sound or profitable, which became a key factor in the company’s collapse
  • Employees falsified sales reports to meet their quota at the vision products company Bausch & Lomb
  • Incentivizing school teachers on exam pass rates, led to them teaching their students how to pass the exams rather than teaching them how to learn. Falsifying test results to increase school pass rates and maintain funding levels also occurred.

If you are not careful, when you set goals too high, people can stop innovating, experimenting and learning, because they are too busy. They may be working harder “doing more of what they already know”, but are they working smarter? Are they getting better?

Also, if people look at the goal, and think, “Even if I work hard, there’s no way I can reach this”, they begin to doubt their intelligence and ability, and feel like failures. Employee engagement drops.

Here are my recommendations for setting Metric performance thresholds.

Individual goals promote a culture of competition.

Being too focused on achieving individual goals vs team goals may decrease discretionary behaviors, such as helping out co-workers. This can erode the foundation of cooperation that holds groups together. Competition can ultimately lower overall performance.

General Electric’s Steve Kerr, an expert in reward and measurement systems was quoted as saying, “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 employees need to meet ambitious goals

Stanford Professor, Chip Heath has shown that managers tend to have a strong bias in favor of extrinsic incentives: They rely too heavily on financial rewards, underestimating the importance of intrinsic motivation, such as making progress and learning new skills. Greater effort and performance often result from designing jobs to provide freedom of choice, the chance to develop one’s skills and expertise and the opportunity to do work that matters. Evidence also supports the importance of a fourth factor: a sense of connection with other people.

Here’s my response to the question clients often ask me, “Should Metrics/KPIs be linked to remuneration?” (hint: they shouldn’t).

Now don’t get me wrong. I’m a big believer in goal setting, and setting clear, specific targets is well proven to be a far superior approach to just turning up at work and expecting people to “do your best”.

But as the researchers claim, goals are like powerful medicine, and you need to take care to reduce the potential for side effects. My recommendation is that for every Metric you come up with, think carefully about the consequences.

Ask yourself, “If we focus on this Metric, what behavior is this going to drive in my people?”

And here’s the interesting one, “Is there a potential dark side to this behavior if it were taken to an extreme?”

Think about the consequences of a person doing whatever it takes to achieve their Metric target. Are there any trade-offs or potential negative consequences?

For more information on this topic and examples of excessive measurement or using inappropriate measures, see my related article: The Tyranny of Metrics.

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Until next time…
Stephen