You probably know the standard recipe for performance management in teams and organizations:
- Define mechanisms to measure performance in various dimensions;
- Calculate current levels of performance in these dimensions;
- Set goals for improving performance levels over the next periods (weeks, months, etc);
- Add incentives to teams or people who reach goals;
- Monitor closely;
It seems like an effective approach. It aims to generate:
- Alignment and focus on what is important;
- Employee motivation;
- Feeling of progress and comfort when the goal is achieved;
Before you stop reading and think that we follow or recommend this recipe, let’s look at the side effects of it.
When a team or person pursues a goal, a local optimization usually happens. That is, by focusing exclusively on their interests, one team can generate harm to another team or even to the organization in the long run.
Let’s look at two examples:
Local optimization in space – A sales team that aims at a certain amount of sales per month can – in order to hit the target – promise totally unrealistic deadlines, leaving the team responsible for delivering the project or product in a rough spot. In the end, the reputation of the company ends up being ruined.
Local optimization in time – An application development team that aims to produce new features every week can leave behind what is called a “technical debt”, that is, a codebase that will bring many problems for updates and in the near future.
Loss of time and energy
Managers and employees invest considerable time and energy…
- Estimating or guessing values that need to be achieved, often without taking into account that market, environment, and product conditions have changed from the last year, or that they will change over the next three months.
- Negotiating the goals, sometimes within a disguised game between the manager and the collaborators. Each one trying to ease his own side.
- Measuring everything that can be measured. Marking every break made at the telemarketing center. Creating spreadsheets, calculating and checking if there is no one manipulating the numbers.
- Justifying why a goal was not achieved. Even if the goal has been guessed, even if the conditions have changed radically. The collaborator or manager, in order not to lose his reputation, must juggle to explain what neither he nor anyone understands.
Goals and incentives erode intrinsic motivation
Have you read our text on motivation? Read before continuing. When we set a goal for someone to follow, we are directly attacking their autonomy and distorting their sense of purpose. Hitting targets and winning the incentives takes the place of purpose.
In the short term there may be an increase in the effort (not necessarily performance) of those who have received the goal, but in the long run this effect decreases performance and increases work-related stress and even the energy level employed.
Excessive focus on the goal, aside from taking our focus away from what our real purpose is, leads to yet another problem: manipulation.
Goals stimulate manipulation
It is common to find ways to manipulate a system to achieve the goals assigned to us. We do this deliberately or even innocently, with no intention of causing harm.
Have you heard that salesperson’s story that in the last months of the year decides not to sell above the goal, in order to avoid having a higher goal in the following year?
Setting goals and controlling people so that they do not manipulate the numbers within your organization creates an environment that is at least uncomfortable. This separation between those who create the goals and those who are required to follow creates an environment where collaboration, openness and trust are difficult attributes to sustain.
Finally, Charles Goodhart formulated a law that puts another stone on the subject. He worked at the Bank of England and was a professor emeritus at the London School of Economics and made the following remark:
When a measure becomes a goal, it ceases to be a good measure.
So if you value quantitative and metric analysis, do not let them be contaminated by the practice of setting goals.
Okay, then how do we get the benefits of goals without using goals?
Alignment and focus on what is important
Have a clear purpose for your organization and a clear purpose for your team. Set or agree on priorities. This conversation can be far more useful than discussing goals.
Feeling of progress and comfort
Do not forget to celebrate and enjoy evolution and small successes (which can come in other forms, not just hitting targets). Use metrics and evaluate trends by learning to learn more about the current state of your organization and business.