Management without goals? Impossible, if you believe the large number of popular science and specialized books about management topics. Goals, target agreements, and bonus systems connected to target achievement are all part of every manager’s toolbox.
The approach “Management by Objectives” coined by Peter F. Drucker, co-founder of management sciences, clarifies the purpose of setting goals: All activities within a company should contribute to its overall success. Goals or “objectives” form the basis of this process.
Goals increase motivation and work performance.
A large number of scientific studies provide evidence for the positive impact of goals on motivation and work performance. However, possible undesirable side effects are often overlooked in practice. We summarized the most important side effects.
Goals allow us to focus our attention and activities. The big picture is sidelined and often forgotten.
Goals describe a state in the future that should be achieved by appropriate methods. If this state or condition is too specific and if the pressure is too high, other important variables are getting lost or forgotten. As a result, very specialized optimizations are achieved instead of the overarching goal. Just to name a few examples: Revenue optimization at the expense of sales results, one-dimensional cost optimizations regardless of adapting customer requirements, and technical over optimization that customers can’t afford since the product or service price went up immensely.
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Short-term goals lead to steps that may have negative long-term effects.
If you want to run a marathon, you won’t start the same way as running a one hundred meter sprint, if you want to be the first at the end. Nonetheless, marathon runners still set interim goals and adjust their pace according to their set objectives and their physical and mental condition. The point is not to be the first at every interim goal, but to notice deviations from their set targets, their competitors, the route, and the weather. All these variables form the basis to get into a position of power in order to be the first crossing the finishing line. It is quite similar for organizations. A victorious battle is not the same as a victorious campaign. Short-term goals that are not embedded into the big picture result in sprints that wear you out.
Individual goals undermine team work and increase internal competition.
The theory behind goals is relatively simple: Setting goals is a mechanism to increase motivation. These mechanisms work on an individual level and increase competition within a company. Under certain conditions (corporate culture, pressure to perform), this competition may even reach levels that harm team work across functional, divisional, and regional boundaries. Complex issues which can often only be solved in teams are often sidelined and come only second to the achievement of individual goals.
Goals increase risk appetite and lead to unethical conduct.
The end justifies the means – if demanding goals need to be achieved in an environment of pressure and competition. Questionable measures are legitimized by their contribution towards reaching the goals. Combined with a corporate culture that sanctions unethical conduct insufficiently, fraud and deception are flourishing. The results are harmed customers, creative accounting practices, and financial crises.
Goals lead to a reduced instead of increased motivation.
Goals reduce creativity and impede learning effects.
Creativity and learning require space to take new paths and to try out new approaches. Trying to reach specific goals under high pressure often does not leave much space to think about alternative strategies. If the objective is to run towards the exit in a burning building, target focus has a clear advantage. However, if the objective is to develop new product concepts in an early development stage, specific goals and a high pressure to perform have a negative impact on the creative and learning process.
Markus is one of the founders of CQ and leads trainings in the area of Management and Mechanical Engineering. He holds a Master and Doctoral Degree in Economics and Computer Science from the Technical University of Vienna and a MSc in Organisational Behaviour from Birkbeck College, University of London. Being a dedicated "Knowledge Worker", Markus has continued his career with various private sector assignments in the management consulting, automotive and mechanical engineering industry.