The beneficial effects of managerial goal-setting have been overstated, and the harm caused by those goals has been largely ignored, according to a new paper co-authored by Lisa Ordóñez, a professor of management and organizations in The University of Arizona Eller College of Management.
The paper is scheduled to be published in the February 2009 issue of the Academy of Management Perspectives.
"There is no question that challenging goals can boost on-the-job performance," said Ordóñez, the Levine Faculty Fellow at Eller. "But we argue that goal-setting has become overprescribed. This is a review paper that collects extensive evidence that goal-setting can lead to a rise in unethical behavior, inhibit learning and result in a host of unintended effects."
For example, the paper cites a study that found that in order to meet sales goals of $147/hour, Sears auto repair staff overcharged for work and completed unnecessary repairs on a companywide basis (Dishneau, 1992). Similarly, specific, revenue-based goals fueled the success of energy trading company Enron in the late 1990s. "But by focusing on revenue instead of profit, the executives drove the company into the ground," Ordóñez said.
Ordóñez and her co-authors recommend that managers ask themselves 10 questions before setting goals. These include: Are the goals too specific? Is the time horizon appropriate? How will goals influence organizational culture? Are individuals intrinsically motivated?
"For decades, scholars have recommended goal-setting as an all-purpose means of motivating individuals," Ordóñez said. "But the research is clear that unless the goals are carefully considered and monitored, the results can be disastrous."