The goal setting that you’ve been encouraged to do over the years may have hurt you as much as helped you.
For decades, an oft-repeated management truism has been that setting goals improves performance and motivation. From the hallowed halls of the Wharton School to the digital psychobabble of the motivational-speaker-du-jour, we have been told that goal-setting is essential to meaningful growth. “You can’t improve what you can’t measure,” they say; and you can’t set measurement criteria without first setting performance goals.
I agree with this concept. But it seems there’s a downside to goal setting that few have been willing to talk about. And, until that downside is considered and worked into your performance equation, even your positive goals may bring negative results.
A Harvard Business School paper titled “Goals Gone Wild: Systematic Side Effects of Over-Prescribing Goal Setting” offers some telling examples of “goals gone wild”:
- In the early 1990s, Sears Roebuck set a revenue goal for auto repair personnel at $147 per hour. This goal was a stretch for many repair centers, and the pressure to perform at this level led staff to overcharge for work and make unnecessary repairs.
- Enron’s policy of paying huge bonuses to salespersons who hit their revenue goals led to the company-wide policy of focusing on sales rather than profits, which was a contributing factor in the demise of the company.
- Ford Motor Company’s goal to bring the Pinto to market by 1970 (under a tight deadline) led to management signing off on unperformed safety checks to expedite the development of the car. The perilous positioning of the car’s fuel tank led to 53 deaths and multiple lawsuits due to collision fires.
In each of the above examples, the company’s stated goal became the over-riding operating paradigm for employees. Achieving the goal became more important than customer safety, honesty and profitability.
It’s easy to become focused on a goal to the exclusion of everything else. Psychologists call this tendency “inattentional blindness.” In 1999, Daniel J Simons and Christopher F Chabris of Harvard’s Department of Psychology presented a paper titled “Gorillas in our midst: sustained inattentional blindness for dynamic events”. Their supporting study engaged groups of students to watch a video in which two teams – one wearing dark shirts, the other white shirts – passed a basketball within their group. Observers were to count how many times a ball was passed within their assigned group.
How many times a ball was actually passed was irrelevant to the study. Observers were so focused on counting passes within their assigned group that many failed to notice that during the video a man wearing a gorilla outfit walked to the middle of the screen, pounded his chest in gorilla fashion and then walked off. The observers were task-focused to the exclusion of the surrounding environment. The problem of “too much focus” has broad application to the usefulness of goal setting for you and your employees. According to “Goals Gone Wild,” goals that are too specific, too narrow, too many and too challenging are all problematic. Improperly considered goals distort risk, ignore the consequences of failure and lead to unethical behavior and ineffective use of time.
Also, the performance window used to measure a goal directly affects outcomes. Too much emphasis on short-term goals may encourage employees to view their quotas as ceilings rather than floors on performance. When employees quit trying once they reach their goal your bottom line suffers.
For example, in an attempt to answer the question “why is it so hard to get a taxi in New York City on a rainy day?” a 1997 Harvard study (those guys at Harvard do a lot of research, don’t they?) revealed that most NYC taxi drivers stay on-duty until they have earned double what they pay to lease their cab for a day. On rainy days they pick up more fares, so they make their “nut” earlier in the day and then go home. If drivers used a longer time horizon for their goal – say weekly or monthly – they would likely stay out longer on rainy days and go home earlier on sunny days. On average, they would make more money and work less.
This particular example sheds light on the practice of dealers who aim for a retail price benchmark of “2X wholesale” without considering what their operating margin has to be to stay in business. A short-term goal of getting 2X may be inadequate; averaging markups over a longer period gives a truer picture of pricing performance and will lead to higher profits.
The key to setting goals that you won’t regret is to establish goals that align with your personal values. If you value money over integrity, you will eventually find yourself with no customers at all. If you value recreational time over time spent working, your family and friends may love you all the way to bankruptcy court. What’s needed for a fulfilling life and a successful business is balance. To the degree that your business goals align with what you hold most dear, you will find fulfillment in running your business.
You certainly have financial goals; you may also have educational goals, family goals and spiritual goals. If some of these categories aren’t important to you, then don’t set goals for them. When setting goals for yourself, your company and your employees, consider that goals should be:
• Clearly written down
• Specific (not just “do your best”)
• Achieved within a reasonable time
• Broken into achievable short-term segments to reinforce progress
• Attached to personal values (“I will earn $XX,XXX by date so that I can take the family to the beach for a week”)
• Reviewed periodically with an advisor to establish accountability.
Though his quotes are usually taken tongue-in-cheek, baseball great Yogi Berra summarized the process of goal setting when he said: “If you don’t know where you are going, you’ll end up someplace else.”
Previously published in Antique Trader Magazine