Dysfunctional Goal-Setting: All Too Common?

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​ Maurice Schweitzer

Take a minute and watch this Visual Cognition Lab video, by Daniel J. Simons, professor, Psychology Department and Beckman Institute, University of Illinois. Count the number of times people in the white shirts pass the basketball to one another. (Don’t continue reading before watching the video.)​​

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So, you came up with a number … but did you notice the person in the black gorilla suit who sauntered to the middle of the court, pounded his chest and walked off? If you’re like most people, you didn’t. For most people, intense concentration on the act of counting (as well as focusing on the white shirts and actively blocking out the color black) causes them to fail entirely to notice the gorilla.

According to Maurice Schweitzer, associate professor, Operations and Information Management Department at the Wharton School, University of Pennsylvania, the video is a classic example of the way in which goal-setting narrows people’s focus. He maintains that goals serve naturally to narrow the focus of a team or an organization—often dangerously so—such that they overlook considerations that are vital to their own interests. Schweitzer and his co-authors of “Goals Gone Wild: The Systematic Side Effects of Overprescribing Goal Setting” (February 2009, Academy of Management Perspectives) assert that the harmful effects of goal-setting have received far too little attention in the management literature, and the authors aim to correct that oversight.

The Perspectives piece gives a couple of egregious examples of the narrowing function of goals with the cases of Enron’s revenue goals and Ford’s goals for its Pinto model. In the case of Enron, one researcher (cited by the Perspectives piece) likened the situation to “paying a salesman a commission based on the volume of sales and letting him set the price of goods sold.” Because Enron executives focused on revenue, rather than on profit, they ruined the company. Likewise, in the late 1960s, when Ford was losing market share to foreign competitors that were producing smaller, more fuel-efficient cars, Lee Iacocca announced an ambitious goal: By 1970, Ford would unveil a model that was “under 2,000 pounds and under $2,000.” The company achieved its goal, but because of the tight deadline, many levels of management neglected needed safety checks until late in the design phase.

When Ford finally discovered that the Pinto could ignite on impact, rather than correcting the design, the company stayed true to the original goal and rushed the car to market. Ford executives calculated cynically that fixing the design would cost more than the lawsuits resulting from (what turned out to be) 53 deaths and many injuries. The Perspectives article pointed out that, in the case of the Pinto’s manufacturing, Ford met the goals it set for certain values (speed to market, fuel efficiency and cost) at the expense of other very important values that weren’t considered (safety, moral behavior and company reputation).

With questions drawn from issues raised by the Perspectives article, SHRM Online interviewed Schweitzer on the ramifications of goal-setting—dysfunctional and otherwise—for organizations and their stakeholders.

SHRM Online: From the Perspectives article: “Can goals be tailored for individual abilities and circumstances while preserving fairness? Strive to set goals that use common standards but also account for individual variation.” Do you think it is possible to set goals in such a way that all employees will believe they are fair?

Schweitzer: I think that this is a difficult challenge. Ideally, you would involve employees in the goal-setting process and use objective standards as you can. In some cases, you can use prior performance to set goals, but this can also represent a problem in case employees underperform so that their future goals will be manageable.

SHRM Online: Can a sense of competition among employees be healthy?

Schweitzer: Absolutely. Competition, like goals, can motivate people to exert more effort and become more engaged. However, competitive environments are not conducive to cooperation. If employees work independently, competition will work. If employees need to work cooperatively—if what they do is interdependent—then competitive systems will cause significant harm. Recent work, including some of my own research, demonstrates that people who compete with each other are less likely to cooperate with their competitors both in the current (competitive) domain, and afterwards.

Competition also raises other issues, such as what happens to the winners and losers. How do they relate to each other? One disadvantage is that high-performing employees become harmed and ostracized by the losers. Anticipating that, high performers may lower their effort levels.

SHRM Online: You also mention that “harsh punishment” should be avoided as a penalty for not meeting goals. Can minor punishment be a useful motivator? Do “consequences” need to be applied carefully so as not to breed resentment?

Schweitzer: Penalties always grab attention more than commensurate rewards. People really dislike losses. They will work hard to avoid them, and resent them—even small penalties—when they receive them. You can think about how you feel when you incur a late fee penalty for a movie or get a parking ticket. The parking ticket need not be very expensive, but for most people seeing that piece of paper on their windshield affects their mood for a long time.

SHRM Online: What about material rewards for attaining goals? Should rewards be avoided (so as not to cause envy between employees)?

Schweitzer: Awards will make goals more powerful (e.g., you win a trip to Hawaii for selling 30 cars). Giving awards, however, requires thought. In award ceremonies or other public displays, e.g., giving someone a special parking space or putting their name on a plaque, will do a few things. One thing it will do is communicate to others who a role model should be. Another thing it will do is breed resentment and envy. The recipient of the award may enjoy positive benefits but also harmful consequences as others in the organization resent them.

SHRM Online: Without threat of punishment or promise of significant material rewards, can goals have any motivating influence?

Schweitzer: Yes. Even goals without rewards motivate people. For example, self-set goals (e.g., to run miles, finish the report by Thursday) will motivate people.

SHRM Online: You give a couple of examples of organizations (Enron and Ford) for which goals were disastrous. Can you give examples of organizations that have used goals successfully to motivate employees while enhancing the organization’s long-term health and profitability?

Schweitzer: In the 1960’s, Boeing set a goal for the 727 aircraft. It would seat 131 passengers, fly nonstop from NYC to Miami, and be able to land on a runway that was less than a mile long (runway 4-22 at LaGuardia). JFK set a goal for putting a man on the moon. In each of these cases, these goals motivated people and organizations.

My concern, however, is that as goals focus attention they restrict attention, and that sometimes this narrow focus comes at the expense of other important aims.

For example, GM set a goal of 29 percent market share and even had executives wear buttons with a “29.” Obviously, or perhaps not so obviously, market share is not the goal. Profitability and long-term sustainability are.

With No Child Left Behind, the goal is to make sure students pass tests. This will lead teachers to focus teaching on the material covered on the test—though we know that what students should learn at school is complicated (e.g., how to get along with other people). In other cases, and there are some examples of this already, teachers will cheat on the tests.

SHRM Online: From the article: “Are individuals intrinsically motivated? Goal setting can harm intrinsic motivation. Assess intrinsic motivation and avoid setting goals when intrinsic motivation is high. ” How can managers gauge whether their employees are sufficiently intrinsically motivated?

Schweitzer: If employees find their work interesting, rewarding and meaningful they will be intrinsically motivated.

SHRM Online: Do you believe that this study will help? Do you really believe that companies need to be reminded that “profitability” and “fiscal responsibility” are essential to any business? And that the effectiveness of any strategy (such as goal-setting) needs to be benchmarked against how it will affect the bottom line?

Schweitzer: I do. Many companies, like the GM example of executives wearing “29” buttons, demonstrate just how carried away companies have become with goals. We are also trying to reach fellow academics who have largely neglected to study the harmful effects of goal setting. What we study and teach should shift.

SHRM Online: You have noted that faulty goal-setting was a major factor in the current recession. Was it a cause—or merely a symptom of lawless corporate greed—a hallmark of a nonsensical system invented to serve no one but certain individuals who want to grab as much wealth for themselves as quickly as they can?

Schweitzer: I believe it was a cause. When a bank sets a goal to grow larger (in terms of loans made) or Fannie Mae sets a goal to increase home ownership, they are motivating people to devalue fiscal discipline. In these examples, people made a series of bad decisions. Unfortunately, this type of decision-making was systemic, widespread, and has helped to contribute to the recession that we currently face.

SHRM Online: Some might suspect that the basic problem (at Enron, for instance) was that certain individuals more or less knew what they were doing in creating a system of faulty goals—or at least they didn’t have much motivation to care whether the company fails—because they thought they had much to gain personally through graft and mismanagement, whether the company failed or not. So, is there enough motivation for CEOs to care whether their companies fail? (Or do we need more regulation, more government oversight?)

Schweitzer: There are incentive and oversight problems. I believe, however, that people fail to appreciate how narrowly people will focus on a specific goal. My intuition is that managers set quantity goals assuming that people will maintain quality. There is a terrific example at [vegetable food company] Green Giant. Managers gave rewards for employees who found bugs in the vegetables. Ultimately, this prompted employees to start bringing bugs with them to work—so that they would be rewarded for the bugs they “found.”

SHRM Online: Besides short-sighted greed, what causes corporate leadership to embrace strategies that undermine their companies’ long-term profitability? Is it ignorance? Some other cause?

Schweitzer: There are two classic problems that people face. One is perspective-taking. Many leaders fail to appreciate how other people will perceive the problem. For example, I’ll bet that the architects of No Child Left Behind didn’t imagine that teachers would cheat on the tests. The other problem is thinking ahead. Bank executives failed to appreciate what it means to pursue aggressive growth in loans.

SHRM Online: How can companies—from leadership through middle-management, on down—avoid getting caught up in game-like strategies (whether goal-setting or something else) that distract from the “big picture” view of the organization’s long-term health and viability?

Schweitzer: I would prefer to see managers motivate employees by making work more meaningful. For example, some drug companies get their employees to visit sick patients who benefit from taking their drug. Some car companies get teams to work on [different] parts of a car. Rather than turning the same screw, they get to see a part of the car take shape.

Maria Williams is a staff writer for SHRM Online.