How to avoid the problems of target-setting

HOW TO AVOID THE PROBLEMS OF TARGET-SETTING Alan Meekings1, Steve Briault1 and Andy Neely2 1 Landmark Consulting, UK 2 The University of Cambridge, UK Abstract Advocates and critics of target-setting in the workplace seem unable to reach beyond their own well-entrenched battle lines. While the advocates of goal- directed behaviour point to what they see as demonstrable advantages, the critics of target-setting highlight equally demonstrable disadvantages. Indeed, academic literature on this topic is currently mired in controversy, with neither side seemingly capable of envisaging a better way forward. This paper outlines a more fruitful approach, based both on theory and practical experience. Context Advocates of target-setting in the workplace and their critics seem unable to agree on any common ground. This is perhaps not surprising, as there are clear contradictions between the arguments advanced by both sides. On the one hand, there is incontrovertible evidence of the damaging effects of arbitrary numerical target-setting and, yet, on the other hand, there is a significant body of academic evidence supporting the benefits of 'goal-directed behaviour'. So, the obvious question is, "Can such fundamental contradictions be resolved, and, if so, how?" The logical place to start is by reviewing the two competing points of view. In The Red Corner In the red corner stand the advocates of 'goal-directed behaviour'. They point to sundry benefits, such as: • "Challenging goals lead to better performance than do easy or vague goals" (Latham & Locke, 1979). Indeed, Locke and Latham are insistent that "goal-setting theory is among the most scientifically valid and useful theories in organizational science" (Locke, Latham and Erez, 1988); and • Happier people. For instance, experiments conducted by the Department of Psychology at Oxford Brookes University, linked to the Oxford Happiness Project (Holden, 1996), showed that depressed individuals who identified and then worked towards constructive goals became demonstrably happier through this exercise alone. Indeed, goal-directed planning has been shown to initiate activity in the frontal lobes of our brains, which also control our sense of happiness. Hence there seems to be a direct connection between goal-directed behaviour and happiness (all other influencing factors being equal). In The Blue Corner In the blue corner stand the critics of target-setting. They point to issues, such as: • Setting targets can be fraught with problems, for example: – If set too high, targets create stress and de-motivation; – If set too low, targets encourage complacency; – If imposed, targets are unlikely to be owned by those who have to deliver them; and – If negotiated, there is an incentive to press for lower targets that are easier to meet, thereby creating tension and suspicion between managers; • Targets cannot be set appropriately without knowing current and future process capability; • Targets do not explain how to improve performance; • Targets provoke cheating, including either distortion of the data or distorting the way the work gets done; • The cultural impact of target-setting is typically negative, destroying trust, warmth and personal responsibility; • Targets usually only cover those aspects of performance that are simple to measure, rather than a genuinely systemic perspective. In other words, targets "attempt to find one measurable thing to represent the whole" (Blastland and Dilnot, 2008); and • Often, hitting a numerical target leads to missing the real point. Targets are typically one-dimensional and reductionist (often based on averages or percentages) and fail to promote whole-system improvement (Seddon, 2008). These are hardly trivial concerns. As Simon Caulkin wrote in an article in The Observer (Caulkin, 2009), "Targets can kill." Drawing on examples from across the NHS in the UK, in situations where people had died as a consequence of the mindless pursuit of mandatory targets, Simon Caulkin argued cogently against putting in place an oppressive target-setting regime. So, this is no idle contest. The Protagonists Within academia, these two adversarial viewpoints are currently hotly debated. For instance, in Academy of Management Perspectives in 2009, there were two, contradictory papers published in the very same edition, entitled: (1) "Goals Gone Wild: The Systemic Side Effects of Overprescribing Goal Setting" (Ordóñez et al., 2009); and (2) "Has Goal Setting Gone Wild or Have Its Attackers Abandoned Good Scholarship?" (Locke and Latham, 2009). It is hard to imagine how academics could be more polarised or argumentative in one single edition of a respected management journal. Sadly, it seems safe to predict that these two academic communities will continue arguing with each other, as neither party seems capable of moving beyond what they currently believe to be true. Indeed, Locke and Latham went on to say, in a subsequent paper published in Academy of Management Perspectives later in 2009 (Latham and Locke, 2009), "We conclude by recognizing that our disagreements with Ordóñez are not small and list several reasons why we are not sanguine about the possibility of a reconciliation." Moreover, this ongoing debate between the advocates of goal-directed behaviour and the critics of target-setting is further complicated by the fact that annual budgets can create 'arbitrary numerical targets'. This risk is highlighted in a recent Harvard Business Review paper by Andrew Likierman (Likierman, 2009). If ever new thinking were needed in the field of organisational performance management, then addressing the issue of goal-directed behaviour and target-setting has to be a prime candidate for attention. Have We Seen Anything Like This Before? Every now and then, scientific debate reaches extreme levels of polarisation. For instance, around the turn of the nineteenth century, proponents of the 'wave theory of light' (sitting in the red corner, as the current champions) and the proponents of the 'particle theory of light' (sitting in the blue corner, as the upstart challengers led by Albert Einstein) were similarly at loggerheads. It took a 22-year old graduate, Geoffrey Ingram Taylor1, to conduct the famous experiment that proved light could behave both as a wave and as a particle at the same time – hence opening up the whole new field of quantum physics. Might there be a similar resolution to the current impasse between the proponents of goal- directed behaviour and the critics of target-setting? The answer is "Yes" – there really is a more fruitful approach that can enable organisations to achieve the apparently impossible trick of reaping the benefits of goal-directed behaviour while concurrently avoiding the disadvantages typically associated with target-setting. The New, More Fruitful Approach The seven elements of this new, more fruitful approach are as follows: (1) Understanding the typology of targets; (2) Clarifying the terminology used; (3) Distinguishing between differing uses of measures; (4) Adopting a systemic perspective, encompassing all the key factors influencing organisational performance; (5) Acknowledging the unknown and unknowable; 1 Sir Geoffrey Ingram Taylor OM (1886-1975) went on to become one of the most notable scientists of the 20th century. (6) Charting performance; and (7) Differentiating managerial time spans of attention and added value, from front line to boardroom. This paper describes each of these elements in turn, and discusses generic approaches to changing how people think about and use target-setting in practice. Understanding the Typology of Targets It is important to recognise that targets can come in differing guises, such as: • Close-as-you-can targets; • Far-as-you-can targets; • Benchmark (or competitive) targets; and • Yes/no targets. Close-as-you-can targets are typically based on idealised aspirations such as: • Zero defects; • 100% customer delight; • Exact conformance to specifications; • Never cancelling a medical appointment; • No accidents; and • Every arrow hitting the bull's eye (in archery terms). In practice, ideal performance will seldom be achieved. However, the pursuit of perfection is neither meaningless nor necessarily demotivating. Getting closer to the bull’s eye can often constitute meaningful improvement. Targets of this kind can serve to focus attention on what is important. They can also replace notions such as 'acceptability' or 'meeting specifications' with the concept of continually striving for perfection. Henry Royce2, of Rolls-Royce Motors, was one of the first and most passionate advocates of this approach. As he frequently urged his workforce, "Strive for perfection in everything you do. Take the best that exists and make it better. When it does not exist, design it." Taiichi Ohno3, the originator of the Toyota Production System, was equally insistent that the pursuit of perfection is essential for the identification and elimination of waste in manufacturing operations and other processes. Following this logic is paramount in certain situations. 2 Sir Frederick Henry Royce (1863-1933), British engineer and car manufacturer. 3 Taiichi Ohno (1912-1990), Japanese engineer and car manufacturer. For instance, it can never make sense to aim for a few planes to crash, or a few new-born babies to be dropped in maternity wards, or a few parachutes not to open in service.