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Beyond the Classroom : Goals Gone Wild

March 2009

By Liz Warren-Pederson

Beneficial effects of managerial goal-setting have been overstated, and the harm caused by those goals has been largely ignored

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 Eller College of Management professor of management and organizations Lisa Ordóñez.

“There is no question that challenging goals can boost on-the-job performance,” says Ordóñez, Levine Faculty Fellow at the Eller College. “But we argue that goal-setting has become over-prescribed. 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,” explains Ordóñez.

Ordóñez and her co-authors recommend that managers ask themselves ten questions before setting goals. These include: Are the goals too specific? Is the time horizon appropriate? How will goals influence organizational culture? And are individuals intrinsically motivated? “For decades, scholars have recommended goal-setting as an all-purpose means of motivating individuals,” Ordóñez says. “But the research is clear that unless the goals are carefully considered and monitored, the results can be disastrous.”

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