Used wisely, goals can effectively align the workforce with company strategy. For example, a company that clearly communicates several clear and attainable objectives (like three) for a quarter or fiscal year has given the workforce some useful high-level guidelines about how to focus their efforts.
But cascading goals, while they can work well, also offer several pitfalls if they are too numerous or only communicated in the context of an annual focal review:
1. Without strict boundaries, they can create a lot of work. As part of each review cycle, someone or some committee needs to formulate the goals and then managers need to translate them into digestible chunks for their teams, these have to be discussed, approved, communicated, understood and reviewed. To be sure, many companies that have implemented cascading goals with measurable performance improvements. But cascading goals can also take on a life of their own and become an end in themselves rather than the means to an end. Come on guys, we have to get these goals defined by tomorrow - who wants pizza?
2. People have short attention spans. After three or four clearly articulated goals, it’s easy to lose track of what one is supposed to be focused on. An extreme example of this was offered in a recent AMR report 'When Performance Management Worlds Collide, Business Will Benefit', which included a case study of a company that ended up with over 1000 goals. How aligned do you supposed employees felt with corporate strategy at that company? Um. . . was that 83% more customer satisfaction and 16% less spending or . . . ?
3. Rarely does a purely top-down approach ensure anyone’s loyalty or buy in and there is evidence to suggest that this is truer than ever. Each day a larger percentage of the workforce embraces Web 2.0 social networking applications that provide real time interaction, and expectations have evolved. Especially among twenty-somethings who grew up using social networking applications as casually as the rest of us used to pass hand written notes in class, we see that employees increasingly prefer an ongoing dialog to a complicated once-a-year edict from on high. Thou shalt sell more. Now go away until next year.
4. A thought-provoking article from the Wharton School* warns against the indiscriminate use of goals, citing evidence that employees with overly-ambitious goals ‘will ignore sound business practices, risk the company's reputation and violate ethical standards.’ Moreover, too often goals are set with inappropriate time lines, which can result in managers ignoring long-term strategic problems in favor of short-term quarterly results. And finally, indiscriminate goal-setting can cause employees to develop a very narrow perspective of their work, which can have a negative impact on quality. Sure we can deliver a system that predicts stock prices to the nearest sixth of a cent up to five years in the future by the end of the year. Just sign right here.
This is not to say that setting goals is bad but they are most effective when they provide clear, attainable direction, have an appropriate scope and time horizon and aren’t used as a substitute for employee manager communication.
*‘Goals Gone Wild: The Systemic Side Effects of Over-Prescribing Goal-Setting,’ Ordonez, Lisa D., Galinsky, Adam D. and Bazerman, Max H., Academy of Management Perspectives, February 2009.