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Jessica Tillipman
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Julie DiMauro
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Thomas Fox
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Marc Alain Bohn
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Bill Waite
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Shruti J. Shah
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Russell A. Stamets
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Richard Bistrong
Contributing Editor

Eric Carlson
Contributing Editor

Are goals good for people and bad for organizations?

Goal setting. We do it every day. Usually, we have multiple goals running at the same time. Finish a marathon, learn Italian, master the violin. Personal goals like those are healthy and keep us moving forward. And because goals work well for us, we think they must work well for our organizations too. But do they?

Post mortems on corporate disasters reveal goals as an underlying cause. At Wells Fargo, unrealistic cross-selling goals (and a compensation scheme to match) corrupted the culture and a huge part of the workforce. At VW, unattainable clean-air goals resulted in a hideous corporate cheating scandal. Boeing’s goals for the 737 Max led to two crashes that killed 346 people. Enron’s growth goals (“to become the largest retailer of electricity and natural gas in the United States and the largest provider of both in Europe”) morphed into outrageous criminal behavior.

What about FCPA offenses? Do corporate goals play a role there too? Richard Bistrong, a one-time FCPA defendant, wrote five years ago about goals sinking compliance programs. Dig deep enough into big FCPA enforcement actions and you’ll likely find goals behind most bad decisions.

But why? If goals work for individuals, why not for groups of individuals, aka organizations?

I’m no psychologist or theologian. But here’s what I see: Individuals have a conscience. An inner voice tells us what’s right and wrong. It usually keeps us between the buoys while we chase personal goals.

Though individuals have a conscience, groups don’t. Somehow, group membership untethers the moral compass. The inner voice goes quiet. That helps explain why so many “normal” people cheat. Why otherwise solid citizens become corporate bribe payers or accomplices.

It’s easier than most people realize, according to Stanford prof Margaret Steen. She wrote in 2008 that ordinary, well-meaning people “get caught up in activities they should have known were wrong.” Prof Steen didn’t talk about goal setting specifically. But she said “group power” (among other things) turns honest people into lawbreakers.

A year later, four academics published a controversial HBR paper titled “Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal Setting.”

“For decades,” they said, “goal setting has been promoted as a halcyon pill for improving employee motivation and performance in organizations. Advocates of goal setting argue that for goals to be successful, they should be specific and challenging, and countless studies find that specific, challenging goals motivate performance far better than ‘do your best’ exhortations. [We], however, argue that it is often these same characteristics of goals that cause them to ‘go wild.’”

The authors concluded that “harmful side effects of goal setting are far more serious and systematic than prior work has acknowledged.” Goal setting harms organizations “in systematic and predictable ways,” they said, and can “degrade employee performance, . . . harm interpersonal relationships, corrode organizational culture, and motivate risky and unethical behaviors.” (my italics)

There it is. Corporate goal setting is a compliance risk. A big one. That’s why compliance departments should either oversee goal setting or review proposed corporate goals, especially sales goals.

What to look for? Richard Bistrong boils it down to the Ten Commandments of goal setting. Don’t be over specific. Don’t go wild on “stretching.” Watch who sets the goals. Avoid goals that promote excessive risk taking. Understand which goals might corrupt your culture. And so on.

That’s good advice. Compliance, it turns out, is one goal we can all live with.

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