Goal setting used to be a simple undertaking; we’d set our SMART (specific, measurable, attainable, realistic and time bound) goals and be done with it. However, new research is highlighting the detrimental effects goals can have on business and personal behaviour, if they’re not set in a holistic context taking account of business and personal values. It’s vitally important to identify our values and use them as a framework for setting and prioritising goals.
We all have goals, be they personal or business goals. We may not write them down and we may not even acknowledge them, let alone prioritise them, but we all have them. If we want to achieve the goals that are most valuable to us, we should take time identify them, prioritise them, act on them and measure them.
In Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal Setting, the dangers of ineffective goal setting are highlighted. http://www.hbs.edu/faculty/Publication%20Files/09-083.pdf Ordóñez, Schweitzer, Galinsky and Bazerman state:
“We identify specific side effects associated with goal setting, including a narrow focus that neglects non-goal areas, a rise in unethical behaviour, distorted risk preferences, corrosion of organizational culture, and reduced intrinsic motivation. Rather than dispensing goal setting as a benign, over-the-counter treatment for motivation, managers and scholars need to conceptualize goal setting as a prescription-strength medication that requires careful dosing, consideration of harmful side effects, and close supervision”
Revenue rather than profit – Enron
In the publication, the authors cite Enron’s demise as an example of ineffective goal setting.
In the late 1990s, specific, challenging goals fuelled the energy-trading company Enron’s rapid financial success. Ackman (2002) compares Enron’s incentive system to “paying a salesman a commission based on the volume of sales and letting him set the price of goods sold.”
Even during Enron’s final days, Enron executives were rewarded with large bonuses for meeting specific revenue goals. In sum, “Enron executives were meeting their goals, but they were the wrong goals,” according to employee compensation expert Solange Charas.
By focusing on revenue rather than profit, Enron executives drove the company into the ground. The executives were incentivised to suck the life blood out of the company.
Profit over safety – Ford – Pinto
The authors also cite one of the most infamous and shameful examples of misguided goal setting in corporate history. In the late 1960s, the Ford Motor Company CEO Lee Iacocca announced the specific and challenging goal of producing a new car (the Ford Pinto) that would be “under 2000 pounds and under $2,000” for purchase in 1970. This goal, coupled with a tight deadline, meant that many levels of management signed off on unperformed safety checks.
One omitted safety check concerned the fuel tank, which was located behind the real axle in less than 10 inches of crush space. Lawsuits later revealed what Ford should have corrected in its design process: the Pinto could ignite upon impact. Investigations revealed that after Ford finally discovered the hazard, executives remained committed to their goal and instead of repairing the faulty design, calculated that the costs of lawsuits associated with Pinto fires (which involved 53 deaths and many injuries) would be less than the cost of fixing the design.
It’s hard to imagine the thinking and conversations that surrounded the calculated decision not to address the faulty design.
Stafford Hospital – an unhealthy focus on money and Government targets
One of the most high profile examples of goals gone wild is a contemporary news item. The Francis report into 1,200 deaths at Stafford Hospital highlighted 290 recommendations for reform and the Francis report said there is an unhealthy focus on money and Government targets that means the NHS does not put its patients first.
Surely this highlights the need to set goals, especially financial goals, in the context of the organisation’s values. Francis also highlighted the key impact of the trust board’s decision to try to save £10m in 2006-07, as part of its desire to gain foundation trust status.
“The board decided this saving could only be achieved through cutting staffing levels, which were already insufficient.” It also ignored staff’s concerns, he added.
Values should be stitched into an organisation; starting with the Strategic Business Plan, values should be disseminated to every employee and should ensure that goals at every level of an organisation run in line with an organisation’s values. Values should help to limit the negative side effects associated with goal setting (assuming our values are positive). Values that inform goals are the method for ensuring that goals don’t go wild.