Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal Setting, was a scholarly research paper published in February 2009 and compares corporate goal setting to prescription-strength medication. According to Maurice Schweitzer, who co-wrote the document with three colleagues, goal setting “requires careful dosing, consideration of harmful side effects and close supervision.” I would like to take a look at some of the downfalls of setting goals and how to avoid disaster when planning goals as part of youremployee incentive program.
Being too specific
When people have to do x, y and z in order to get reward a, b or c, several things happen: mass confusion, disengagement and shortcuts. As a student in college, I remember sitting in class one day when my business professor walked in and began the lecture by drawing a triangle on the dry erase board. The professor wrote quality, speed and then cost by each point of triangle. In business, you can have two of the points of the triangle but not all three. You can have a high quality project quickly but it will cost you. When it comes to your company reward program, keep in mind that if you have to create a formula to find out if a person reached a goal or not, it will be difficult for participants to understand and meet. Additionally, you cannot create goals that require employees to provide you with all three points of a triangle at the same time.
Instead of being very specific, keep your goals general and house similar achievements in a single award category. For example, if salespeople earn rewards for selling incrementally more products or services, then keep the increments fairly large. I have seen not come across a client yet who needed to distinguish a hundredth of a percent increase from half a percent increase.
Having too many goals for the time given
Offering a mix of short and long term goals can be overwhelming, especially to newly hired employees who may not know where to start. The research paper gives an example of managers who are responsible for meeting quarterly earnings goals and developing long term strategies. The short term earnings goals were weighted more than bringing ideas to save in the long term and thus, managers only focused on what they could handle in the short time. To avoid a situation where people hone in on the short term and forgo the long term, weigh the importance of goals with the amount of rewards people can earn.
Setting highly specific and ambitious targets
No company wants to end up as the next Lehman Brothers, but organizations that set specific and extremely difficult to attain goals with large payoffs are encouraging risky behavior. Although what happened to the Lehman Brothers is a stale current event, this behavior is a repeat of the past as noted in the paper. In the 1970s, the CEO of Continental Illinois demanded that the bank, which was one of the largest banks in the United States at the time, drastically expand its loan portfolios. The bank employees went aggressively after new loan customers and took more risk on the loans it issued, which lead to the company’s downfall. Incorporating staff members into the goal setting process is a great way to know if your goals are off-base.
Taking the results for granted
In the early 1990s, Sears set specific sales goals for its automotive repair shops. In order to meet or exceed the sales goals, mechanics both made unnecessary repairs and overcharged customers. As customers filed complaints, Sears was left to deal with a public relations nightmare that it created. When unexpected results occur and objectives are blown out of the water, be sure to spot check that the goal was achieved ethically and safely. Gather feedback from employees to improve both the goals of your incentive program and performance as a whole. Also, if someone does exceed a goal dramatically and did it without being the rules, find out what he or she did and how this success can be duplicated.
Schweitzer, as quoted on Forbes.com, advises that a lot of specific goal setting is unnecessary. It is more important to engage employees by recognizing the work they do well every day. He cites research by Stanford University organizational behavior expert Chip Heath, who "found that people tend to think that other people need extrinsic rewards more often than they really do. ... To us, our work is interesting and meaningful, but we tend to think that other people come to work because of money." By building in discretionary recognition budget into your incentive program and its goals, you will have the most powerful tool in employee motivation.