Goal-Setting Theory – An Overview on Setting Goals That Work

May 15, 2010
Robert McKelvie

Setting Goals - ilker

Both individuals and organizations can accomplish more using goal-setting theory. Setting goals is a proven way to achieve higher performance and success.

Goal-setting theory was developed over the past 40 years through research conducted by industrial/organizational psychologists. Its purpose is to explain and predict the effects that setting conscious performance goals have on task performance or achievement levels. A major aim has been to understand what types of goals are effective in motivating high performance and what other factors affect goal setting, motivation and performance. The evidence supports the proposition that setting specific and challenging goals is an effective way to deliver high performance for both individuals and organizations.

Key Findings of Goal-Setting Theory

The main findings so far of goal-setting theory are:

The mere act of setting goals leads to higher performance compared to having no explicit goals.
Setting specific, difficult but attainable goals leads to higher performance.
Setting goals affects performance by directing attention and behavior toward goal-relevant activities.
Challenging goals energize people to put forth greater effort than they otherwise would.
Hard goals also enhance persistence when people can control how they allocate their time.
Difficult goals lead to the marshaling of existing knowledge and skills as well as, when necessary, motivate the search for new learning and strategies to accomplish the required tasks.

Other important findings relate to “moderator” variables that affect the goal-performance relationship. The key moderators in goal setting include:

Goal Commitment – the stronger the commitment to a goal the more likely that performance will be high. Goal commitment in turn can be affected by perceived importance of the goal and by an individual’s “self-efficacy”, or the belief that he or she can achieve the task(s) required.
Feedback – reliable, objective verbal and visual feedback on one’s progress toward a goal supports the motivation and effort to achieve it.
Task Complexity – if highly complex tasks are involved in achieving a goal, then difficult goals may not influence performance positively, or as much, unless learning goals are first employed to acquire any new knowledge or new skills required.

Applications of Goal-Setting Theory

The main context of goal-setting research has been the motivation and performance of individuals in the workplace. But setting goals has also been shown to be effective at the level of groups, organizational units, and entire organizations. In addition, setting goals for personal development is also an effective means for an individual to accomplish more.

Some of the main applications of goal-setting theory in organizations include:

Enhancing employee productivity
Controlling or reducing costs
Performance appraisals
Self-regulation at work (e.g., decreased absenteeism)
Identifying situations where significant learning or training is required
Generating intrinsic (internal) motivation in people to achieve higher performance
Supporting extrinsic (external) motivation by making rewards variable depending upon level of performance rather than all or nothing based on attaining the goal or not, which can decrease performance.

Practical Guidelines for Effective Goal Setting

Setting goals is not an easy or certain process. Experience helps, and practitioners of goal-setting theory have developed an acronym that summarizes the characteristics of effective goals – SMART – which stands for:

Specific – vague goals don’t work as well
Measurable – or they’re not very meaningful
Attainable – or they’ll decrease performance
Relevant – to organizational or personal needs
Time-based -- a (reasonable) deadline to keep effort moving forward

There are variations of the key words in this acronym, but they largely have the same total result. Setting goals should be done with all five of these goal attributes in mind for them to be most effective. Examples of such goals might be:

Increase the number of weekly sales calls made by 10% by the end of the next quarter.
Decrease printer and copier expenses by $2,000 a month by the end of the year.
Decrease travel expenses by 25% per year by the end of 2011 (by holding more meetings online possibly)

Limitations of Goal-Setting Theory

In general, setting specific, difficult goals raises performance levels. But there are some situations whereby this relationship fails, including:

Goal Conflict – When there is conflict between the goals of an individual (manager) and the goals of the organization, the goal-performance relationship can fail. A manager may seek to maximize his personal bonus at the expense of pursuing more important organizational goals.
Wrong Framing – This occurs when difficult goals are framed in a way that is perceived as threatening and performance decreases as a result.
Riskier Strategies – Difficult goals can lead some to employ riskier strategies to achieve them. Sometimes risky strategies can fail causing performance results to be lower rather than higher.
Unethical Behavior – When difficult goals have penalties or punishments for not meeting them, or very large rewards, cheating and dishonesty can be encouraged.

See the article "The PItfalls of Setting Goals in Organizations" for more information on this subject.

Setting Goals Well Leads to High Performance

Setting goals properly usually leads to high performance in organizations. The mere act of setting goals focuses attention on the things that matter most and motivates effort to achieve them. But goals do need to be specific and challenging for maximum effect on performance.

Commitment to goals, perceived goal importance, confidence in ability to accomplish the tasks required (self-efficacy), and frequent feedback all support high performance. When knowledge and abilities to tackle complex tasks are in question, learning goals are often required before performance goals will be met.

Sources:

Locke, E.A., & Latham, G.P. (2002). Building a Practically Useful Theory of Goal Setting and Task Motivation. American Psychologist, 57, 705-717.

Locke, E.A., & Latham, G.P. (2006). New Directions in Goal Setting Theory. Current Directions in Psychological Science, 15, 265-268.