A few years ago, researchers from Harvard, Wharton, Kellogg, and the University of Arizona argued that goal setting was “overprescribed” and featured “powerful and predictable side effects” (pg. 6). While acknowledging past research demonstrates that “specific goals provide clear, unambiguous, and objective means for evaluating…performance” and thus “motivate performance far better than “do your best” exhortations” (pg. 7), the researchers found that this intensity of focus on goals can lead to tunnel vision and poor, often unethical decisions. Examples include Sears in the early 1990s, whose sales goals for its auto repair staff led to overcharging and unnecessary repairs. Revenue-based rather than profit-based goals at Enron helped lead to the company’s destruction. A challenging goal (a car “under 2,000 pounds and under $2,000”) coupled with a tight deadline at Ford in the late 1960s brought about the easily-combustible Pinto, many deaths and injuries, and expensive lawsuits. These narrow goals crowded out not only ethical behavior, but the broader purpose of the goals themselves. Quality, in essence, is often sacrificed for the quantifiable. Short-term gains are pursued rather than long-term health and growth. Furthermore, such narrow goals create “a focus on ends rather than means…[The researchers] postulate that aggressive goal setting within an organization increases the likelihood of creating an organizational climate ripe for unethical behavior“ (pg. 10). Narrow goals decrease satisfaction, even with high-quality outcomes, which have negative effects on future behavior. They can also inhibit learning and experimentation with alternative methods, undermine cooperation, and harm intrinsic motivation.
Goal setting is often a subject of discussion about behavioral ethics and internal programs. We’ve seen in recent cases such as at Wells Fargo and Volkswagen how cheating and lying become the norm when performance goals are not reasonably achievable. Recent evidence in a paper by Niki den Nieuwenboer, João da Cunha, and ES collaborator Linda Treviño shows the internal dynamics and processes that lead directly to cheating behaviors.
The researchers, one of which was embedded inside the company, observed managers and sales staff over 15 months at a large (10,000 employees) telecommunications company. The company had established goals for its desk sales teams designed to motivate productivity, including a target for sales as well as sales-related work, such as making cold calls to customers, and gathering information about potential customers, among other planning activities.
For the senior leaders at the company, these targets were part of a broader– and cost-lowering — strategy of shifting sales staff from the field towards desk jobs. The field staff cost the company $225 more per customer contact than the sales teams working at desks. The aim was thus to incentivize desk people to improve efficiency and reduce costs in the long-run.
However, because the desk sales team cheated the internal systems, the company didn’t actually gain the cost savings that it thought it had. The apparent success of the desk sales team (based on false information) led to upper management reducing the number of field staff sales numbers, which undermined an important sales channel at the firm.
The misconduct was uncovered inadvertently. Originally, one of the researchers was embedded inside the company to observe the implementation of a sales-related IT system. As he observed and interviewed employees about their use of the system, the scope of the research was soon expanded to include unethical behaviors. He observed that both middle managers and frontline sales staff were aware that the sales goals were unreachable, and that sometimes sales staff tried to push back on pressure from their managers. When sales targets didn’t budge, the managers got creative to solve their goals, devising strategies to induce the sales staff to cheat the internal systems. Manager pay was directly tied to whether their direct reports met performance goals hence the need to game the system to safeguard their income.
The managers took advantage of “structural vulnerabilities” in the system. For example, they changed rules such as expanding the definition of “sales calls” so that more types of calls counted towards that goal – case in point, they counted internal calls and emails as “external” sales calls. Some also just logged fictitious information for calls that never occurred. Other manipulations involved devising IT and administrative schemes that allowed the desk sales teams to take credit for work done by the field sales teams. Additionally, to satisfy the requirement that sales plans be developed for customers, some simply were told to copy and paste plans across various customers, because they knew that very few of them would actually be verified.
Manipulating strategies to meet targets became the norm at the organization. While employees in the unit were aware of these practices, the managers worked to ensure that word of the deceptive practices didn’t get out to senior leaders or to other units.
To tweak the Keynes/Hayek rap battle a tad, quotas are a means, not the ends in themselves.