Beware the goals you set for your organization in 2011

Dec 28, 2010 Business Daily, Management, Strategy

“What could be more valuable than having a goal? From our earliest days, teachers, coaches, and parents advise us to set goals and to work mightily to achieve them – and with good reason. Goals work. The academic literature shows that by helping us tune out distractions, goals can get us to try harder, work longer, and achieve more.
But recently a group of scholars…questioned the efficacy of this broad prescription. “Rather than being offered as an ‘over-the counter salve for boosting performance, goal setting should be prescribed selectively, presented with a warning label, and closely monitored, they wrote.”

DANIEL PINK, Drive (2009)

OK, I now what you’re thinking: is Thought Leadership now going to criticize goal setting, of all things? Is nothing sacred? What in the name of profit can be wrong with setting stretch goals, getting teams to focus on an external target? It’s what gets things done, what keeps the pressure on, what good business is founded on…

First, a clarification. Personal goals, that individuals set for themselves and are aimed at developing personal mastery of a discipline, profession, task etc are fine. The problem is with externally imposed sales and profit targets.

As I have mentioned here before, I like Daniel Pink a great deal and found his book ‘Drive’ to be one of the most thought-provoking of recent years. The scholarly work he is referring to in the excerpt was done by academics from the cream of US business schools: Harvard, Wharton, Kellogg and Eller. So pay attention.

Here’s the thing about goals: they narrow the focus and concentrate the mind. That’s good. But they come with a built-in cost. That very narrowing limits conceptual, lateral thinking. Goals also restrict our own perception of right and wrong – achieving the goal and associated payoff becomes paramount in the mind. And so, you guessed it, unethical behaviour is induced.

Examples abound. Sales quotas placed on auto-repair staff cause over-charging of customers and unnecessary repairs. The artificial need to produce a car by a certain date at a certain price leads to the omission of vital safety checks. As Pink puts it, if an extrinsic reward is the only destination, people will choose the quickest route there – even if that means taking the low road.

And so the behaviour that is legion – executives gaming earnings reports to grab performance bonuses, athletes injecting themselves with steriods – is no longer that surprising. It is caused by the narrow goal culture.

What to do? First, define success more broadly. If you have goals around sales, you also have to have them around customer satisfaction and mutual employee support. Second and most important, develop a culture of emphasizing intrinsic, not extrinsic, motivation at your organization. Allow people to take joy in the task itself, in achieving mastery of it, in causing delight for customers and other staff members. Celebrate and reward people for the quality of their relationships, not just the numbers they clock.

I have been at close quarters with many an organization that has a goal-focused culture. They do get things done, no doubt about it, and they clock up impressive numbers very quickly. But only in the short-term. Sooner or later, the shortcuts taken to achieve the results come to light – in the form of financial risks, a me-first, pushy culture, employee burnout and churn, customer disillusionment.

Does that not explain very neatly what happened to all the world’s toxic banks? They went berserk chasing astonishingly short-term, narrow goals – and nearly destroyed the world economy. Does it not explain the risks taken by BP, and the refusal of Toyota to face safety issues? They were blinded by narrow goals around market share and profitability. So as we end the year, do think carefully about the goals you set in 2011 and what kind of behaviour they will cause.