The first quarter of every year sends executives scrambling for a set of annual goals to submit to their managers. Goals have been shown to improve company performance in just about any organization in any industry.  The problem arises, however, when executives are blinded by the benefits of goals to see how they may fail to fulfill the objectives of a company.  In the worst situations, poorly conceived and executed goals are detrimental to an organization.

Harvard Business School released a working paper on developing goals likely to cause positive results.  The paper gives an examples of how choosing goals that conflict with objectives affect the organization, and they use everyone’s favorite American automotive narrative to illustrate their point:

In the late 1960s, the Ford Motor Company was losing market share to foreign competitors that were selling small, fuel-efficient cars. CEO Lee Iacocca announced the specific, challenging goal of producing a new car that would be “under 2000 pounds and under $2,000” and would be available for purchase in 1970. This goal, coupled with a tight deadline, meant that many levels of management signed off on unperformed safety checks to expedite the development of the car—the Ford Pinto. One omitted safety check concerned the fuel tank, which was located behind the real axle in less than 10 inches of crush space. Lawsuits later revealed what Ford should have corrected in its design process: the Pinto could ignite upon impact. Investigations revealed that after Ford finally discovered the hazard, executives remained committed to their goal and instead of repairing the faulty design, calculated that the costs of lawsuits associated with Pinto fires (which involved 53 deaths and many injuries) would be less than the cost of fixing the design. In this case, the specific, challenging goals were met (speed to market, fuel efficiency, and cost) at the expense of other important features that were not specified (safety, ethical behavior, and company reputation).

The paper ends with a checklist of how to assign goals properly:

• Are the goals to narrow/specific?
• Are the goals too challenging to achieve within a time frame?
• Do short-term goals harm long-term objectives?
• Will any goal increase the likelihood for an employee to take a risk, and is your organization comfortable and prepared with a risk management strategy?
• Could any goal encourage unethical behavior?
• Are goals established on common standards so they can be tailored to individuals while still remaining fair to others?
• Will goals positively influence the organization’s culture?
• Are employees intrinsically motivated?
• Considering your organization and industry, is learning or achieving a level of performance more important?

Establishing goals for an organization is not as simple as turning objectives into actionable statements.  Modern executives should view goals from multiple perspectives to check for clarity in how employees may interpret or act on a goal.  Above all, goals should push management’s strategy for moving forward while enforcing the organization’s guiding principles in the process.

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