The Bear Trap that Looks Like a Cookie: The Seduction of Goal Setting Part 4 – Practical Experiences or How Not to Succeed in Goal Setting

             Many of you have likely been exposed to goals and goal setting at one time or another. Some experiences may be pretty good but I am willing to bet that many have been either pretty poor or down right dangerous. For a variety of reasons, most people required to set goals either have no training or no knowledge of good goal setting techniques. They may be driven by upper management or team leaders who are themselves ill-prepared to help or even harbor dangerous ideas when it comes to the overall organization mission. Below I have shared a few of the situations I have encountered in my working career regarding goals, goal setting and the results of goal setting. We can see the results of poor goal setting in the Wells Fargo Bank illegal practice of opening unauthorized accounts. The news broke around the first part of September, 2016 and caused significant problems for the bank and is still on-going at this time. Investigations by federal agencies, penalties and fines of $185 million (which some think is small potatoes for Wells Fargo), the CEO, John Strumpf, stepping down and significant headaches for the bank’s legal, ethics, and customer service groups are all causing problems for the bank. All because of bad goals. (Google Wells Fargo unauthorized accounts, for a list of several news organizations and articles on this.)

In my early career days I worked for a utility company in their finance group. We were different from the accounting department but still under the company treasurer. One of our main functions was to estimate future  weather (temperatures) and the effect it would have on revenues. We were very interested in average temperatures. Since our product, natural gas, was used by retail customers mainly for heating we tried to gauge the impact of varying weather scenarios. This was especially true for how cold we thought things would get. We would start with general cold weather estimates and based on historical data, which we had quite a bit of, we would estimate average per customer usage in various areas throughout our service territory. Then during the year I would compare actual sales to our projected sales and see how we did. It was especially helpful when the differences in average temperature vs. actual temperatures supported the difference in usage and revenue generated. Sometimes the differences were opposite the expected impact and we had to look for other things that might affect usage and revenue.

             One year the treasurer asked me to prepare the forecast usage (weather impact) and the corresponding revenue generated for the annual budget. I spent several days going over the historical data and making adjustments I thought were reasonable and justifiable. When done I took the forecast and revenue generated to be reviewed. The treasurer didn’t look at my model or assumptions or discussion but at the bottom line, the revenue. He said “Bruce, this total revenue number needs to be $1.0 million higher” and handed it back to me. I started to explain how the average temperatures and regional adjustments had been developed and that I felt very confident that there wasn’t an error. The treasurer gently stopped me before I got very far and commented that he wasn’t concerned about the model or assumptions but that the model needed to generate $1.0 million more revenue. It took me a little while and a couple of trips back to him but I finally caught on and added an “other revenue” line to the budget that contained $1.0 million. It was then signed off. During the year I would compare the actual weather vs. the average weather forecast to see where revenue differences could be explained and I used the “other revenue” line to absorb changes I couldn’t explain.

             That was one of the first experiences I had with goal setting and reaching the goal. The treasurer either had set a goal or had been given a goal to generate so much revenue. It was not as important that the forecast model was right or wrong as it was to have the correct revenue generated. This illustrates how goals can impact in ways and places we might not normally expect. Who would have suspected that weather manipulation was so important. It wasn’t of course but it was a means to an end. No one knew what the weather was going to be but we had established, over many years, a process that had been well vetted and well received. That particular year the process was changed because of a goal.

             Some time later I was a manager in the public finance group of a large financial services company. I managed a group of very highly trained professionals with unique skill sets and knowledge. In an organization of over 100,000 employees my group of 4 to 6 people were the only employees that did what we did. They were not clerical people but like most professionals knew and could perform some clerical functions. At one point I was approached by a new HR representative asking about the performance reviews I had prepared for my people. She had reviewed my performance reports and had prepared new performance review reports she wanted me to use. The new forms were a series of statements with check boxes I was to use to show if my people were under, at or above performance levels as contained in the statements. The HR person was concerned that I had not set enough goals  for my people. Her main concern was that I did not have sufficient concrete goals to see if my people had “performed” fully. The performance reports I had been using were ones used for several years and I had thought, adequate. HR decided to “update” the process. I was not involved in writing or helping create the new reports that would be used for my people who were the only people in the company that did what we did. I was not given the chance to review or comment on the new reports. I was told to fill out the new reports by a date specific and return them to her. It was a mess. The reports were essentially a modified clerical position performance review report. Since some of my most junior people were on a similar pay level as some of the most senior clerical people, it appeared the HR person had just modified  clerical performance forms. As you would suspect it didn’t work, at all. It took me about 4 months to get things straightened out. In the end I was able to get goals that allowed my people enough flexibility to do their varied jobs and some freedom to try new things and ideas.  But I still had to include some goals with check boxes. I have trouble understanding the need for checkboxes.

             Sometimes a company wants to make drastic changes to its business model. New goals can be an effective way to implement changes quickly. During the great recession of 2007 – 2009 the organization I was working for bought out a competitor. In my business area the purchased firm was given control of the operations not the buying firm. The people who had been bought out by our company convinced executive management that extreme changes needed to be make which would make division look more like the bought out company. There was a lot of difference between the two division (old division and purchased division) philosophies. The bought out division was able to quickly make changes through establishing new goals. Many people who didn’t fit the new look or mold were fired, several quit because they didn’t agree with the new direction and goals and the change was completed fairly quickly but with a fair amount of disruption to the new combined division.

             This concludes the series of blogs on goal and goal setting. Don’t give up hope on goals but don’t be snowed under by them either. As the authors of the Harvard Business study on goal setting I referenced in part 1 of this series, goal setting should be used judiciously and with much thought and regular, consistent review. It is not something to take lightly.

The Bear Trap That Looks Like a Cookie: The Seduction of Goal Setting Part 3 - It's All About the Goals, Stupid

             We have been talking about problems associated with goals and goal setting, especially performance goals. We will continue the process of reviewing and uncovering the pitfalls and traps of poorly worked and implemented goals. Remember, it is easier to create poor goals than good ones, as many of you may experience regularly.

             Many claim that goals set at the most challenging levels create the greatest inspiration or commitment or performance. You have all heard that if we don’t shoot for the stars we will never hit them. The logic is flawed. Many may look at such goals and see the impossible nature and just not try. If employees do try for such goals they may resort to excessive risk taking, unethical behavior or dishonesty in their efforts to reach such goals.

             A problem of risk taking is that it may very well distort the risk preferences of the company or manager. Extreme goals can drive excessive risk taking. It does no good for a manager to claim they didn’t want excessive risk when there are few or limited options to success. Excessive risk can be generated by management and managers who are fixated on goals to the exclusion of common sense. Some managers may associate the goals with the idea of destiny or an idealized future for themselves. Goals then drive the justification for risk taking. Risk taking can also be used to justify face-saving activities if goals are not meet. At Wells Fargo during the great recession of 2008 the company acquired Wachovia Bank. At that time senior management designated Wachovia management as in charge of Wells Fargo public finance responsibilities and other related functions. The new management decided that it was necessary to change the focus (goals) for these related areas to become more like what is called a New York investment house. In order to do that it was necessary to create significant changes in goals and emphasis. Many employees were either let go or quite rather than take on the new goals and requirements which many considered overly ambitious and did not serve the bank’s client base. Since that time there has been significant changes in the type of clients served and not served as well as employee turnover and change.

             As mentioned earlier, overly challenging goals can lead to unethical behavior. If missing the goal contains a high price of failure, it may be easier to “fudge” the difference in the actual performance and the goal by cheating or misrepresenting the performance. Extreme goals can make unethical behavior more likely. Aggressive goals can make unethical behavior more rewarding or increase the likelihood of unethical activities or behavior. With such pressure there has to be greater vigilance to watch for and correct unethical behavior.

             Too challenging goals can cause dissatisfaction and lead to psychological consequences of failure. Missed goals can also affect future performance. Dissatisfaction can lead to employees quitting the organization, creating unfavorable comments and stories or other things that lead to loss of clients and customer and reduction in general company goodwill. Wells Fargo’s current problems including $185 million in fines and review by several Federal agencies was created by employees trying to reach over-challenging goals.

             Performance goals can have a negative impact on complex tasks. As individuals concentrate on specific,  challenging goals, they may learn less from the experience which will degrade overall performance. There may be better outcomes from encouraging one to do their best which allows for innovative thinking and solutions outside the box of the goal parameters. Specific, challenging goals may inhibit alternate solutions by creating a too narrow focus and penalize creative thinking. Narrow focused goals may encourage and inspire performance but at the cost of learning and innovation. If the challenge is to put more widgets together that can be addressed by a specific performance goal. However, the likelihood of finding a better way to put widgets together is greatly reduced.

             Goals can become a means unto themselves. They become their own reward. The final outcome moves from improvement to finishing the goal. Managers are likely to overvalue and overuse goals. Management can also use goals as a cop-out to cover poor management skills. This is particularly true in those situations where managers set a challenging new goal (or just a new goal) and then do not provide training, materials or guidance specific to the goals. The individual is left to “use their initiative” to solve the managers problem. The very nature of performance goals can create their own internal problems and barriers to success.

             Individuals may loose their ability to think creatively and independently, instead looking for the solutions only to the goal. The goals then create the drive and focus and may eliminate the ability to see the greater interactions and overall aims. Such things as mission statements and general purposes can get lost in the rush of reaching for the specific performance goal.

             Goals can create perceptions of unfairness which can be a significant problem. This is especially true when everyone has individual goals. One may feel that their goals are much harder or more difficult to accomplish than another. Allegations of favoritism can easily start which seriously damages team work and team communications. If all aspects of a goal are not thought through then it is easier to game such goals. Creative or productive energy is spent gaming the goals instead of improving the overall activity.

             As a former middle manager I was caught in the middle of goal setting; receiving goals from upper management and having to translate and create goals for my people. It was difficult and frustrating. Part of any goal is the need to monitor and control. Cheating on goals is fostered when rewards are dependent on performance quantity and not on quality outcomes. But quality requires more effort, planning and review than quantity. We may inadvertently put individuals into difficult ethical dilemmas by the type of goals we create thus forcing people to make choices that can and do have profound impacts on themselves and the company. Just look at Wells Fargo’s current problems.