Goals and targets can have a powerful impact within organizations – they can shape attention and effort, causing individuals to prioritize reaching the goals. While this is not always a good thing (things that are not targetted may receive less attention), setting expected performance levels can play a big role in driving organizational success. This article explores some of the reasons for this.
One of the main ways that goals and targets can increase organizational performance is by focusing attention within the firm on the defined performance criteria. Assuming that the goals and targets reflect dimensions that ultimately drive organizational success, they can act as an important way of aligning interests within the organization around these key criteria.
Establishes expected performance levels
Goals and targets can also establish expected performance levels. This can bring both benefits and disadvantages. The benefit of this is that it can drive individuals to achieve at a higher level than they were expecting was possible. Potentially putting in extra effort, or devising ways of increasing performance to meet the target. Indeed, gradually increasing the target is one way of continually driving improvements throughout a firm.
However, it is also important to recognize that incorrectly specified goals may have some unintended consequences that do not drive organizational success. These include:
- An unrealistically high goal: If the goal is set too high, this may be discouraging. Rather than motivating individuals to perform at a higher level, this may result in them checking out – believing that the goal can never be reached no matter the effort that is put in.
- Goals that are set too low: Too easily achieved goals can likewise result in reduced performance – if the goals are so easily achieved that it can be obtained (or is potentially already being attained) – then individuals may strop putting in effort when they have reached that level.
Allows you to 'succeed' in reaching the goal
Another benefit of having goals and targets (provided that they are attainable in nature), is that it allows the firm to celebrate success on reaching the goal. This can be a good boost to moral – providing the basis for something within the firm to celebrate.
Provides a basis to connect compensation to performance
Another opportunity with goals and targets is to provide a basis on which to compensate for performance. This takes goals and targets from being something that individuals may strive for (potentially with the expectations that they will influence periodic performance reviews), to something that more directly impacts employee effort.
While this may not be appropriate in all situations – and can drive a lot of internal resentment – it relatively common for at least top management of a firm to have some element of their performance linked with the success of the firm that they manage.
Final thoughts: Be aware of limitations
While goals and targets can be w powerful motivator of individual performance, it is of course important to be aware of limitations – if misaligned with organizational priorities they can result in behaviors that are damaging to the overall organizational performance. When developing goals and targets for the firm, it is thus important to carefully consider which dimensions are important to the ultimate performance of the business, and to monitor the behaviors driving by the targets – ensuring that it is not driving some unintended employee actions.