As part of my MBA I read the paper “Goals Gone Wild” which resonated with me. While this paper was written in 2009 a lot of the key learnings are still applicable. It provides an analysis of the side effects of goal driven organizations and compensation. While goal setting generally has a positive effect on motivation (Locke, 2002) it should be applied with caution as they can go wildly wrong and affect the overall organisation/company.

Goals can suffer from being too narrow, too numerous, too tight, or too challenging. The effects of these issues are reflected in many different scandals and mistakes in large companies, as I’ll outline below. It’s important to ask, for each goal, whether it’s truly needed. Success isn’t defined by the number of goals an organization achieves, but by the overall impact on customers. It’s much better to have a culture where this level of strict accountability isn’t required, instead of one where “management by objectives” is the only way to get things moving.

Narrow Goals

When goals are too narrow you start developing tunnel vision and don’t notice the other important factors around the goal. A goal that focuses on one metric for example e.g. increase metric x by y% year over year may result in other important metrics being disregarded. The following examples illustrate this problem and its real world effects:

Wells Fargo Account Scandal: In 2016, it was discovered that employees at Wells Fargo had created millions of fake accounts in customers’ names without their consent. The root cause of this widespread fraud was linked to the bank’s aggressive sales targets and incentive programs. Employees were under tremendous pressure to meet narrow sales goals, which led to unethical behavior and widespread consumer fraud. This scandal resulted in significant fines for Wells Fargo and damage to its reputation. (Forbes Article)

Enron’s Performance Targets: Enron Corporation, once a giant in the energy sector, collapsed in 2001. The company set very aggressive financial performance goals and tied a significant portion of employee compensation to meeting these targets. This pressure led to the use of complex accounting loopholes, special purpose entities, and poor financial reporting, ultimately resulting in one of the biggest accounting frauds in history. Enron’s focus on narrow financial goals contributed to a corporate culture that prioritized short-term gains over ethical behavior and sustainable business practices. (HBR Article)

Sears Auto Repair Overcharging Scandal: In the early 1990s, Sears, Roebuck & Co. was caught up in a scandal involving its auto repair centers. The company had set high sales quotas for its auto centers, leading employees to overcharge customers and perform unnecessary repairs to meet these goals. The narrow focus on sales and profit targets incentivized employees to engage in unethical sales practices, resulting in a loss of customer trust and legal action against the company. (Chicago Tribune)

Too many goals

Too many goals is also an indicator that the goals are too specific and narrow. When the organisation has too many goals it results in diluted focus and will eventually result in a tradeoff amongst the many goals. More often than not quality focused goals are deprioritised over quantity goals as quantitative goals are measurable. The impact of too many goals is a lack of flexibility for teams and could hamper innovation in a company. If everyone is focused on just delivering the many goals they have they won’t have time to think broader or outside the box. They are too focused on delivering results. The goals become the objective as opposed to the long term needs or success of the company.

Short timelines

Short timelines can have unintended consequences such as cutting corners to meet the goal such as cutting corners. Sometimes these effects are extreme as the following examples illustrate:

Boeing 737 Max: In its rush to compete with Airbus and bring the 737 Max to market, Boeing set aggressive timelines for design, production, and deployment. This pressure led to critical oversights in the plane’s design and software, specifically the Maneuvering Characteristics Augmentation System (MCAS). The insufficient pilot training and lack of full disclosure about the system’s functionality contributed to two tragic crashes and a global grounding of the fleet, significantly damaging Boeing’s reputation and financial standing​.

Theranos: Founded by Elizabeth Holmes, Theranos promised to revolutionize blood testing with technology that could run comprehensive tests with just a few drops of blood. Driven by ambitious goals and tight timelines to demonstrate progress and satisfy investors, the company cut corners on clinical validation. The technology was never proven to work as promised, leading to massive legal, financial, and reputational consequences for the company and its leadership​​.

Volkswagen Emissions Scandal: Volkswagen set ambitious sales goals for the U.S. market, particularly for its diesel vehicles, which were marketed as both high-performance and environmentally friendly. To meet these goals within their set timelines, the company installed software in over 11 million diesel vehicles worldwide to cheat on emissions tests. The scandal, known as “Dieselgate,” was uncovered in 2015, leading to billions in fines, legal settlements, and significant damage to Volkswagen’s reputation​​.

Too challenging

When goals are too challenging organisations may take risks that have broader consequences as in the case of Foxconn and BP:

Foxconn’s Production Targets for Apple Products: Foxconn, a major manufacturer for Apple, has faced scrutiny over the years for its labor practices, particularly in meeting the high demand for Apple products like the iPhone. The challenge of meeting these production targets has been linked to poor working conditions, excessive overtime, and a series of worker suicides. These issues have prompted calls for better labor practices and raised questions about the human cost of high-tech consumer products​

BP and the Deepwater Horizon Disaster: BP faced significant criticism for its safety practices leading up to the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. The company had ambitious goals for drilling speed and cost savings, which some reports suggest contributed to decisions that compromised safety measures. The resulting explosion and oil spill were one of the worst environmental disasters in U.S. history, leading to billions in fines and settlements for BP and a tarnished reputation for years​

Ten questions to ask before setting goals

Question to ask before setting goals	Why is this important to ask?	Possible remediation
Are the goals too specific?	Narrow goals can blind people to important aspects of a problem.	Be sure that goals are comprehensive and include all of the critical components for firm success (e.g., quantity and quality).
Are the goals too challenging?	What will happen if goals are not met? How will individual employees and outcomes be evaluated? Will failure harm motivation and self-efficacy?	Provide skills and training to enable employees to reach goals. Avoid harsh punishment for failure to reach a goal.
Who sets the goals?	People will become more committed to goals they help to set. At the same time, people may be tempted to set easy-to-reach goals.	Allow transparency in the goal-setting process and involve more than one person or unit.
Is the time horizon appropriate?	Short-term goals may harm long-term performance.	Be sure that short-term efforts to reach a goal do not harm investment in long-term outcomes.
How might goals influence risk taking?	Unmet goals may induce risk taking.	Be sure to articulate acceptable levels of risk.
How might goals motivate unethical behavior?	Goals narrow focus. Employees with goals are less likely to recognize ethical issues, and more likely to rationalize their unethical behavior.	Multiple safeguards may be necessary to ensure ethical behavior while attaining goals (e.g., leaders as exemplars of ethical behavior, making the costs of cheating far greater than the benefit, strong oversight).
Can goals be idiosyncratically tailored for individual abilities and circumstances while preserving fairness?	Individual differences may make standardized goals inappropriate, yet unequal goals may be unfair.	If possible, strive to set goals that use common standards and account for individual variation.
How will goals influence organizational culture?	Individual goals may harm cooperation and corrode organizational culture.	If cooperation is essential, consider setting team-based rather than individual goals. Think carefully about the values that the specific, challenging goals convey.
Are individuals intrinsically motivated?	Goal setting can harm intrinsic motivation.	Assess intrinsic motivation and avoid setting goals when intrinsic motivation is high.
What type of goal (performance or learning) is most appropriate for the particular objectives of the organization?	By focusing on performance goals, employees may fail to search for better strategies and fail to learn.	In complex, changing environments, learning goals may be more effective than performance goals.

Conclusion

Goals provide essential direction and accountability, but a strong culture is the foundation for creativity, adaptability, and long-term success. Be selective with goal-setting; use it for clear milestones and critical metrics. For most team activities, empower people within a shared understanding of the big picture and a culture that values collaboration, risk-taking, and celebrating the journey alongside the outcomes. Goals and culture should work in tandem; a healthy balance ensures the team has both focus and the freedom to do their best work.

References

Ordonez, Lisa D., et al. “Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal Setting.” SSRN Electronic Journal, Elsevier BV, 2009. Crossref, doi:10.2139/ssrn.1332071.

Locke, E. A., & Latham, G. P. (2002). Building a practically useful theory of goal setting and task motivation: A 35-year odyssey. American Psychologist, 57(9), 705–717.