!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Strict//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-strict.dtd"> Streamline Training & Documentation: Goals Need Success Criteria

Wednesday, March 11, 2009

Goals Need Success Criteria

Universia-Knowledge@Wharton, the Spanish-Portuguese segment of Knowledge@Wharton, published an article today that seems overwrought in cautioning organizations about the pitfalls associated with making goal-setting central to performance management.

In "'Goals Gone Wild': How Goal Setting Can Lead to Disaster," we read about "the hazards of setting goals":
In pursuit of such mandates, employees will ignore sound business practices, risk the company's reputation and violate ethical standards.
I believe such unacceptable consequences of goal-setting are generally due to a falure to qualify goals by defining criteria that specify what successful achievement of each goal requires. Employees need to understand that how goals are achieved will be taken into account in assessing whether the goal achievement is truly successful. For instance, in the article's opening example, the story of the ill-designed Ford Pinto, whose fuel tank was vulnerable to catching fire in a rear-end collision, it seems that Ford neglected to require engineers to include proper attention to safety in the design criteria.

The Universia-Knowledge@Wharton article summarizes a paper (pdf) by Maurice Schweitzer (Wharton), Lisa D. Ordóñez (Eller College of Management at the University of Arizona), Adam D. Galinsky (Kellogg School of Management at Northwestern University), and Max H. Bazerman (Harvard Business School) (SOGB).1

In fairness, I must note that SOGB point to the need to monitor performance as employees pursue assigned goals, and that they base their reasoning in part on the fact that such monitoring is frequently quite difficult. Nonetheless, I would argue that SOGB overstate the degree of unmanageable risk in setting specific goals for employees to meet.

As summarized in the Universia-Knowledge@Wharton article, there are four problems SOGB emphasize as likely to accompany goal-setting:
  • "Goals that are too specific often lead employees to develop such a narrow focus that they fail to recognize obvious problems unrelated to the target." I say that there is no reason for management to let employees overlook problems related to other desiderata.

    SOGB also discuss the problem of setting too many goals, so that employees pick and choose in a manner that does not match organizational priorities. The counterpoint here is that managers need to clarify priorities and coach employees on gauging their efforts to match priorities.

  • Time horizons for goals that are (1) too short, meaning long-term considerations are largely ignored, or (2) too long, meaning employees slack off if they manage to meet a goal in advance of the deadline they've been given. I say (1) success criteria should include optimizing the combination of short-term and long-term considerations, and (2) there is no reason not to plan for special rewards and recognition — and a revised goal/timeframe — to ensure employee productivity is maintained when the initial deadline for a goal proves longer than necessary. (I'd also note that the example of New York cab drivers electing to knock off early on rainy days — because they can meet their own, self-set goals for the daily total of fares earlier than on clear days — is not actually relevant to an analysis of employee response to goals set by management.2)

  • "Workers with highly specific and ambitious targets will engage in risky practices in order to meet them." Again, it seems evident that success criteria should include requirements for appropriate risk management.

  • "Unethical behavior is one of the more obvious pitfalls of overly ambitious goal setting ..." Success criteria requiring adherence to ethical standards, with compliance monitored, are a sine qua non in any respectable organization.
The last two items are aspects of the general issue of perverse incentives. Mitigating perverse incentives involves not only setting appropriate success criteria, but also directly adjusting the structure of incentives to reward desired behavior and not reward behavior that undercuts organizational values.

Where SOGB are on firm ground is their caution concerning undercutting employees' intrinsic motivation by overemphasizing financial rewards. Also well-taken are SOGB's observations that employees will "lose their focus on learning new skills in favor of using tried-and-true methods to meet their quotas," and that "[setting] targets for individual workers can create a culture of competition in which workers tend to shun teamwork in problem solving." But even here I'd say that astute definition of both the goals and the success criteria can mitigate the danger of perverse employee behavior.

In their paper, SOGB discuss two other problems they associate with overuse of goal-setting to motivate employees.

There is the issue of "goal-induced reductions in self-efficacy" that can occur when employees achieve a good result that nonetheless falls short of a stretch goal they were aiming for. This "can be highly dettrimental because perceptions of self-efficacy are a key predictor of task engagement, commitment, and effort." I say that effective leaders will take action in such a situation to acknowledge that employees have done a good job that has moved the organization forward; the stretch goal was overly ambitious, so no one is in trouble for falling short.

Another problem is the difficulty of tailoring goals to match individuals' particular strengths without creating perceptions of unfairness. Managing this issue is a matter of managerial judgment — that takes employee input into consideration — allied with persuasive communication. If an employee is still disgruntled after a manager has heard him/her out, responded with any goal adjustments that may be appropriate, and explained the rationale for the final determination of more or less disparate individual goals, it is fair to point out that the employee may need to find a position that better matches his/her job preferences.

For me the bottom line is that, while SOGB have done well in articulating the issues associated with making goal-setting a central element in performance management, especially in a complex setting, I believe, based on my own observation of companies intelligently implementing performance management systems, that attaching success criteria to all goal statements, providing constructive coaching, and exercising appropriate managerial oversight makes establishing goals for individual employees a crucial part of maximizing odds of mission accomplishment.

1 The link takes you to the working paper version of the Schweitzer et al. article. The published version is in Academy of Management Perspectives, Vol. 23, No. 1 (February 2009).

2 SOGB adopt the view, "If NYC taxi drivers used a longer time horizon (perhaps weekly or monthly), kept track of indicators of increased demand (e.g., rain or special events), and ignored their typical daily goal, they could increase their overall wages, decrease the overall time they spend working, and improve the welfare of drenched New Yorkers." True, and perhaps cab drivers should be reminded of this fact regularly to make sure it hasn't slipped their minds. All the same, we're talking about utility here so, ultimately, it's up to the cabbies themselves to decide how they want to spend their time.


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