The Situationist

Archive for March 22nd, 2009

The Situation of “29” & the Downside of Goal-Setting

Posted by The Situationist Staff on March 22, 2009

1969 Pontiac Firebird (Redline) - flickrAn article by Drake Bennett in the Boston Globe explores the idea that a significant contributor to GM’s woes can be attributed to an apparently innocuous decision — the pledge to return to its former state of having 29% of the American auto market. The article is excerpted below.

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The argument is not that goal setting doesn’t work – it does, just not always in the way we intend. “It can focus attention too much, or on the wrong things; it can lead to crazy behaviors to get people to achieve them,” says Adam Galinsky, a professor at Northwestern University’s Kellogg School of Management, and coauthor of “Goals Gone Wild,” a paper in the current issue of a leading management journal.

“Goal setting has been treated like an over-the-counter medication when it should really be treated with more care, as a prescription-strength medication,” he says.

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[In the 1960's t]wo organizational psychologists, Gary Latham and Edwin Locke, created a theory of human motivation with goals at its center, drawing on their own extensive research and that of others. They found that goal setting had dramatic positive effects on success in just about any arena: work, school, the playing field, even the doctor’s office (people took better care of their own health if they had a goal).

“When people are asked do their best, they don’t,” says Locke, now an emeritus professor at the University of Maryland’s R.H. Smith School of Business. “It’s too vague.” Giving people ambitious and specific goals directs their attention, energizes them, and keeps them engaged longer.

Latham and Locke’s theory quickly permeated executive suites and business school classrooms. The success of General Electric, for example, was described both by the company and its many admirers as a matter of having set the right goals and made sure people reached them.

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Despite these successes, a few management experts began to wonder what sort of price we pay for our goals. Goals, they feared, might actually be taking the place of independent thinking and personal initiative. Goals gave us GE and Southwest, but they also gave us GM and Enron.

Two of these skeptics, business professors Maurice Schweitzer of the University of Pennsylvania and Lisa Ordonez of the University of Arizona, co-wrote a 2004 paper on what people do when they fall just short of their goals. According to Ordonez and Schweitzer’s experiment, in which subjects played a word game and then reported how well they did at it, what people do is lie to make up the difference.

Schweitzer and Ordonez are also two of the coauthors of the “Goals Gone Wild” paper, in Academy of Management Perspectives, which takes the concern about cheating and broadens it. The new paper isn’t based on original research but instead juxtaposes findings from the psychology and economics literature with a sort of greatest hits of disasters in goal setting. It recounts the hostile, dysfunctional, and ultimately criminal atmosphere created at Enron by its practice of rewarding executives based on meeting specific revenue targets. It describes how Sears, Roebuck and Co. started setting sales goals for its auto repair staff in the early 1990s, only to find out that its mechanics were overcharging customers and making unnecessary repairs to hit their numbers.

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Other work suggests that goals with rewards, if not carefully calibrated, can short-circuit our intrinsic enthusiasm for a task – or even interrupt our learning process. Barry Schwartz, a social psychologist at Swarthmore College who has studied decision making, found that subjects paid money to complete a slightly confusing task were significantly worse at figuring out the rules, even after completing it, than those who had received no reward.

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If you are GM, argues [Maurice] Schweitzer, “You clearly don’t want 29 percent market share, you want something much more complicated than that.”

To combat this, Latham, among others, argues that what’s often required is a “learning goal” – one where someone pledges to come up with, for example, five approaches to a thorny problem – rather than a performance goal that assumes that the problem will automatically be solved.

And whatever they are, goals need to be flexible when circumstances change. Francis Flynn, an organizational psychologist at Stanford, says he always tells his students that “the best goal you can have is to reevaluate your goals, semi-annually or annually, to make sure they remain rational.”

Rather than reflexively relying on goals, argues Max Bazerman, a Harvard Business School professor and the fourth coauthor of “Goals Gone Wild,” we might also be better off creating workplaces and schools that foster our own inherent interest in the work. “There are lots of organizations where people want to do well, and they don’t need those goals,” he says. Bazerman and others hold up Google as an example of a company that manages to do this, in part by explicitly setting aside time for employees to pursue their own projects and interests.

Today, as the economic situation upends millions of lives, it is also forcing the reexamination of millions of goals – not only the revenue targets of battered firms, but the career aims of workers and students, and even the ambitions of the newly installed administration. And while it never feels good to give up on a goal, it may be a good time to ask which of the goals we had set for ourselves were things we really needed to achieve, and which were things we only thought we should – and what the difference has been costing us.

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More on “Goals Gone Wild” can be found in this article by The Wharton School. The paper itself is published in the February, 2009 edition of the Academy of Management Perspectives.  For a previous Situationist post on the work of Barry Schwartz, see “A Choice Worth Having.”  For a previous Situationist post on goals and decision-making, see “Team-Interested Decision Making.”

Posted in Behavioral Economics | 3 Comments »

 
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