Sales Management Training Tips:
When Goal Setting Goes Bad
Q&A with: Max H. Bazerman
It's the rare manager who doesn't partake in quarterly or annual
goal-setting sales management exercises. And woe to those who don't
make their sales management goals SMART (Specific, Measurable,
Attainable, Realistic, Timely).
But do these sales management goals really work? Researchers from
four top business schools have collaborated to show that in many
cases sales management goals do more harm than good. Worse, they can
cause real damage to organizations and individuals using them.
"We argue that the beneficial effects of goal setting have been
overstated and that systematic harm caused by goal setting has been
largely ignored," the researchers conclude. Bad "side effects"
produced by goal-setting programs include a rise in unethical
behavior, over-focus on one area while neglecting other parts of the
business, distorted risk preferences, corrosion of organizational
culture, and reduced intrinsic motivation.
One example: the explosive Ford Pinto. Presented with a goal to
build a car "under 2,000 pounds and under $2,000" by 1970, employees
overlooked safety testing and designed a car where the gas tank was
vulnerable to explosion from rear-end collisions. Fifty-three people
died as a result.
Used wisely, sales management goals can inspire employees and
improve performance, the authors agree. But goal setting must be
prescribed in doses, not as a standard remedy to increase
productivity. They even offer a warning label and list 10 questions
managers should ask themselves before starting goal setting.
The working paper, "Goals Gone Wild: The Systematic Side Effects of
Over-Prescribing Goals Setting," was authored by Lisa D. Ordóñez,
Eller College of Management, University of Arizona; Maurice E.
Schweitzer, Wharton School, University of Pennsylvania; Adam D.
Galinsky, Kellogg School of Management, Northwestern University; and
Max Bazerman, Harvard Business School.
We asked Professor Bazerman to explore in more depth some of the
paper's findings.
Sean Silverthorne: So, are you against incentives and goals?
Max Bazerman: No, my coauthors and I are not against
incentives. We believe in incentives. And each of us has found goals
useful in limited domains. But we are concerned about the simple
specification of stretch goals that permeates the goal setting and
management by objectives literature.
Q: How can goal setting go wrong?
A: When people focus on a specific stretch goal, and fail to
perform other valued activities that are needed by the organization,
goals are failing. This is what Staw and Boettger found many years
ago.
When employees care exclusively about reaching a goal, and bad
things can happen if they fail, cheating goes up. This is the most
important result in the goal setting literature—found by my
coauthors Lisa Ordóñez and Maurice Schweitzer.
Q: Are goals by themselves a problem, or is it the way we use
them?
A: When we can so easily predict the dysfunctional behavior
that will ensue, I would argue that it is the goals themselves. Far
too often, people want to blame the individual. But when
organizations and governments create dysfunctional systems that can
be predicted to lead to bad behaviors, I see the problem starting
with the dysfunctional system. And I see the creating of optimal
systems as a key leadership function.
Q: Specifically, what is wrong with managers designing
stretch goals for employees to expand their knowledge or
capabilities?
A: If you know the exact specific behaviors you want, stretch
goals may be just fine. But, if you want employees to engage in
other pro-social behaviors (e.g., helping others in the
organization) and/or to act ethically, you need to be a lot more
careful than simply providing a stretch goal.
Additionally, there is a growing set of research that shows
"learning or mastery" goals have much more positive effects on
performance and internal motivation than "performance" goals.
Q: Your paper is rife with examples of goals gone wild,
everything from overcharging by Sears auto mechanics, to
disappearing New York cab drivers, to Enron. Do you see goals as a
contributor to our current economic collapse?
A: There are lots of culprits, which certainly include
dysfunctional reward systems. And I am sure that goals played a
role. But I certainly do not mean to blame the crisis on a set of
specific goals.
Q: One side effect of goal setting that your team identified
is a rise in unethical behavior. Example: Your paper mentions that
Bausch & Lomb employees falsified financial statements to meet
earnings goals. I know bounded ethicality is an area of study for
you, so could you explain a little more the correlation between
goals and unethical behavior?
A: Sure! The majority of my recent work is on bounded
ethicality, or the ways in which even ethical people engage in
unethical behavior without their own awareness. Thus, many good
people engage in sexist behavior without knowing that they are doing
so. Or they claim credit based on the false belief that their role
on the team was more important than reality would dictate. And they
are affected by conflicts of interest without knowing that conflicts
of interest affect them.
Similarly, good people can focus so much on reaching the stretch
goal that they fail to realize how this has dumped other work on
their co-workers, led the company to accept mortgages that are too
risky, etc. This behavior prompted by stretch goals is leading to
unethical behavior, without the knowledge of the protagonists of the
unethical action—or what we call bounded ethicality. Also, Adam
Barsky theorizes that focusing on goals actually distorts our
perception of what is unethical behavior so that we are less likely
to consider the ethical implications of our actions.
Q: If goal setting is so pernicious, how did it become such
an embedded, accepted (and for publishers, profitable) practice?
A: It is easy to implement. It is easy to measure. It is easy
to document successes. And in laboratory experiments, it has been
shown to be extremely successful at improving the measured behavior.
Lisa, Maurice, Adam, and I simply argue that goals have gone wild in
terms of their impact on other unmeasured outcomes. When we factor
in the consistent findings that stretch and specific goals both
narrow focus on a limited set of behaviors while increasing
risk-taking and unethical behavior, their simple implementation can
become a vice.
Q: When are goals appropriate, and what ingredients should be
included?
A: Sales management goals are appropriate when you know
exactly what behaviors you want, you aren't concerned about
secondary behaviors, and unethical behavior is not a big risk. In
other cases, you still might want to use sales management goals, but
we recommend doing so with caution, and our paper discusses the
needed steps to take (e.g., strong leaders who model appropriate
behavior, oversight to prevent unethical behavior, etc.).
Q: One of the most famous stretch goals was delivered by
President John F. Kennedy: "I believe that this nation should commit
itself to achieving the goal, before this decade is out, of landing
a man on the moon and returning him safely to the earth." Good goal?
A: It was excellent for motivating behavior. It was a stretch
goal that got us going. And as a side effect, it increased training
and funding in the sciences. It may have also increased the degree
to which the United States and the Soviet Union spent limited funds
on mutually unhelpful defense expenditures. So, I think the answer
is in the eyes of the beholder. Personally, I think society might
have better spent the extra funds that went to NASA.
Q: If not goals, what?
A: Creating environments where people want to achieve, where
they want to help the sales management organization, and where they
want to do so in an ethical manner. Research shows that an even
stronger effect than goals is intrinsic motivation, having
individuals do an activity because they find the work rewarding in
and of itself. Given that goals can undermine this intrinsic value
of work, sometimes the best solution is no specific stretch goal at
all or at the very least mastery or learning goals.
I do not need someone to set a stretch goal for me. I am happy to
help make HBS, Harvard, and the broader society a better place. And
if I do not want externally imposed stretch goals, and believe that
I do not need them, I think there are many others out there in the
same condition.
Source: by Sean Silverthorne, Published: March 2, 2009
http://hbswk.hbs.edu/item/4155.html
Subject: Sales Management
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