Goals Gone Wild: The Delicate Art Of Setting Performance Objectives

The goals you set for your organization might be sabotaging the very success that you’re trying to cultivate.

That’s the message from Professors Maurice E. Schweitzer, Lisa D. Ordonez, Adam Galinsky and Max Bazerman – all of whom should surely win an award for the most creative titling of an academic research paper (“Goals Gone Wild” in the Academy of Management Perspectives journal).

In their research, the professors highlighted some intriguing examples of the unintended consequences of goal setting, like this gem:

An NFL team, in an effort to improve the performance of an interception-prone quarterback, added a clause to his contract penalizing him for every pass thrown to the opposing team.  The result?  The QB threw fewer interceptions – but only because he stopped throwing the ball altogether, which wasn’t the desired outcome.

This goal setting phenomenon is routinely on display in business circles, when companies focus so relentlessly on a metric that their people over-rotate on it.  That ultimately drives undesirable, sometimes even awkward behavior.  Perhaps you’ll recognize some of these examples from your own experience, as a businessperson or as a consumer:

• Auto dealerships where franchise recognition is so closely tied to “top box” scores on a satisfaction survey, that staff practically beg customers for an “Excellent” rating.

• Call centers that set targets for call length, leading service representatives to be more interested in getting customers off the phone than they are in actually helping them.

• B2B firms that use Net Promoter^® Score (NPS) as their primary gauge of performance, leading company representatives to hand-deliver the NPS survey at the most auspicious occasions (like on a golf outing with a client).

• Companies with such laser-focus on market share targets that they acquire new business at all costs, even at the expense of profitability.

• Human resource recruiters who are held accountable for qualified candidate “yields” from their sourcing methods, leading them to pass less-than-ideal applicants through the recruiting pipeline.

The ramifications of poorly designed goal systems (and employees’ subsequent gaming of them) can be quite severe.  As an example, look no further than the cross-selling metrics that drove widespread toxic behavior at Wells Fargo — a scandal that continues to haunt the bank years after it came to light that employees were opening unauthorized accounts to help meet performance goals.

To avoid making your organization’s goals its own worst enemy, keep these four tips in mind:

1.  Consider unintended consequences.

In the fervor to address a business issue and rally the troops around an effort, organizations leap to embrace a metric without carefully considering all of the downstream impacts.  If you’re contemplating introducing a new performance measure, or renewing the focus on an existing one — put on your “contrarian hat” before proceeding.  Think of all the bad things that could happen if your staff focused, to a fault, on the line you’ve drawn in the sand.  Based on how detrimental and probable those unintended consequences are, tweak your approach accordingly.

2.  Strive for balance.

Guard against over-rotation on any single metric by creating a balanced system of measures.  For example, if you want to encourage a sales-oriented culture, but wish to avoid staff making sales at any cost, then only reward those top salespeople who also meet some performance threshold for profitability or customer satisfaction.

3.  Set Goldilocks goals.

Setting goals is one management task where it’s dangerous to be cavalier.  Set the bar too high and you create unrealistic performance expectations that can disengage your staff or, worse, lead them to game the system.  Set the bar too low and you miss an opportunity to get people to stretch toward a higher level of performance.  If you want to set a performance target, first track the metric for a period of time to get a sense of its variability as well as the current performance level.  That’ll help you set an informed goal that’s more likely to motivate rather than frustrate.

4.  Beware the tie to compensation.

Pay for performance – yes, I’m all for it.  But organizations can get into trouble when they move too swiftly to tie particular metrics (especially new, unproven ones) to individual compensation.  First, get some experience under your belt tracking the metric and providing individual feedback based on it.  Then structure the compensation linkage in a way that reinforces a balanced approach to measurement.

When it comes to performance measurement and goal setting, simple “carrot and stick” thinking won’t suffice.  Business leaders must invest some real time engineering this piece of their workplace puzzle.  It’s the best way to ensure that your organization’s goals are working for you, and not against you.

(Net Promoter® is a registered trademark of Satmetrix Systems, Inc., Bain & Company and Fred Reichheld.)