Relation of Goal Setting and Goal Sharing to Performance and Conflict for Interdependent Tasks

Despite the prevalence of goal setting in organizations, researchers have not thoroughly examined the implications of goal setting to work outcomes in interdependent work settings. A field survey (n= 442) assessed the relation of goal setting and goal sharing, the extent to which others are aware of an individual's work goal, to performance and conflict across varying levels of task interdependence. The results of moderated regression analyses demonstrate that in highly interdependent tasks, the use of goal setting resulted in lower performance levels. Moreover, goal setting and goal sharing in highly interdependent tasks resulted in individuals' reporting more somatic symptoms. The results are discussed in terms of clarifying the role of goal setting for interdependent tasks.     

The Effects of Group Incentives in an Indian Firm: Evidence from Payroll Data

Abstract. This paper estimates the effects of group incentives on productivity, pay and employment in a large unionized firm in India. Using plant‐level monthly time‐series data from the payroll office for the period 1985–95, and controlling for both (plant) fixed effects and (contract) time effects, the paper provides econometric evidence on the effectiveness of both the level and intensity of incentive pay on the outcome measures. In addition, the relative performance of two types of group incentives defined on the basis of group size is also analysed. The results generally confirm predictions from theory that productivity returns to incentives are non‐linear and concave in shape and that the effectiveness of incentives is decreasing in group size. It is argued that the latter is most likely due to the lessening of the free‐rider problem and the increased effectiveness of peer monitoring associated with smaller groups. The results also point to a negative relationship between the level of incentives and employment over time.     

A Behavioral Analysis of Goal Setting

Goal setting is a promising strategy for improving performance in organizational settings. This paper reviews goal setting from a behavior analytic perspective, discussing the function of goals and a number of key variables related to goal setting: goal difficulty, feedback on goal attainment and participation in goal setting. The advantages of utilizing behavior analytic methodology, such as objective measurement, clear specification of independent variables, intensive experimental designs and a behavioral theoretical framework are presented, along with suggestions for future research in the area.     

Goal Statements and Goal-Directed Behavior

Summary

Goal setting has consistently been shown to increase performance under specific conditions. These goal setting effects have previously been explored from both a cognitive perspective and in terms of traditional behavioral concepts. We highlight limitations of these approaches and propose a novel account based on Relational Frame Theory. This account focuses on both the content of goal statements and the contingencies that maintain goal-directed behavior. The content of goal statements is analyzed in terms of relational networks established for employees. We then detail how the current account explains the major effects noted in previous empirical studies. Two broad types of rule following contingencies that support goal-directed behavior, pliance and tracking, are then described. We then outline how these different types of contingencies results in the variety of goal-directed behavior observed in organizations. Throughout we relate this two-part approach to goal setting to specific recommendations for practice and future basic research.     

Self-Solicited Feedback: Effects of Hourly Pay and Individual Monetary Incentive Pay

The frequency of feedback solicitation under hourly pay and individual monetary incentive pay conditions was examined. A between-subjects design was used with 30 college students in the two groups. Participants attended three experimental sessions and entered the cash value of simulated bank checks presented on a computer screen. Performance was higher for individuals who were paid incentives; however, participants who were paid incentives did not self-solicit feedback more than those who were paid hourly. Rather, participants in both groups solicited feedback quite frequently. Additionally, performance was not related to feedback solicitation. These results suggest that the incentives did not make feedback more reinforcing even though the incentives were functional rewards and the feedback was correlated with the amount of pay earned: the better the feedback, the more pay participants earned. The results also support the position that it may be necessary to pair objective feedback with an evaluative component to enhance performance.     

The Effects of a Goal Setting Intervention on Productivity and Persistence in an Analogue Work Task

The authors of this study sought to quantify the beneficial effect of goal setting on work performance, and to characterize the persistence or deterioration of goal-directed behavior over time. Twenty-six participants completed a computer-based data entry task. Performance was measured during an initial baseline, a goal setting intervention that consisted of either a high, unattainable goal (high goal condition) or a low, attainable goal (low goal condition), followed by a return to baseline, and a second goal setting intervention (the alternate goal to the first goal). In the fifth condition, each participant was given the choice to work in either the high or low goal condition. Greater performance increases were reliably observed during the high goal condition than during the low goal condition, but patterns of persistence or deterioration varied across participants. The implications of the findings for the development and understanding of goal setting interventions in the workplace are explored.     

The Effects of Graphic Feedback,Goal Setting,and Manager Praise on Customer Service Behaviors

Abstract

The current study used a multiple baseline design to investigate the effects of graphic feedback, goal setting, and manager praise on customer service behaviors in a large retail setting. Direct observation of customer greeting, eye contact, and smiling was used to collect data. After baseline data were collected feedback graphs were posted twice each week in the employee break room. A second intervention phase included goal setting and manager praise. Goals were developed based on employees' prior performance and were posted on the graphs. Managers then delivered immediate, verbal praise to employees. Graphic feedback produced slight increases in the customer interaction variables in the front of stores 1 and 2. Another small increase in performance was seen in the back of store 1 and the front and back of store 2 with the implementation of the interventions.     

Graphic Feedback,Performance Feedback,and Goal Setting Increased Staff Compliance With a Data Collection Task at a Large Residential Facility

Because of budgetary constraints, human service organizations frequently expect consultants to recommend methods to enhance staff performance that require little or no additional funding. The current study utilized a multiple baseline across settings design to evaluate and compare the effects of a single intervention and a packaged intervention including graphic feedback and goal setting on approximately 200 direct care staff as a group, to improve the data collection procedure at a residential treatment facility. The single intervention showed some improvement, whereas the packaged intervention yielded substantial improvements and was maintained.     

An Evaluation of the Effects of Very Difficult Goals

In 1968 the first cohesive theory on goal setting proposed that difficult goals produce higher levels of performance than easy goals and that specific goals produce a higher level of performance than “do your best” goals. While over 40 years of research supports this theory, there has been some discrepancy regarding the use of very difficult goals. This study was designed to examine the effects on performance of different levels of performance improvement goals and two different types of feedback, as feedback is often used in conjunction with goal setting. A group design was used with participants receiving one of two goal levels, and two different types of feedback. While no significant effects were found between the two types of feedback, goal level produced significant results in terms of performance and accuracy.     

Work Productivity as a Function of the Percentage of Monetary Incentives to Base Pay

In many individual monetary incentive systems workers receive an hourly base pay and can earn incentives when productivity exceeds a specified standard. The total amount that can be earned in incentives is often expressed as a percentage of base pay. This study examined the effects of different percentages of incentive pay to base pay on work productivity. Seventy-five college students were randomly assigned to one of five incentivebase pay conditions: 0% (no incentives), l0%, 30%. 60% or 100%. Subjects participated in 15 forty-five minute sessions during which they assem: bled parts made from bolts, nuts and washers. Subjects received a base pay amount for assembling a minimum of 50 quality parts per session and a per piece incentive for parts over 50. If subjects assernbled 120 quality parts, the production maximum, the total amount they could earn in incentives equaled 0%, l0%, 30%, 60% or 100% of their base pay. Results indicated that the productivity of subjects in the l0%, 30%, 60% and 100% groups was significantly greater than that of subjects in the 0% incentive group; however, the productivity of subjects in the l0%, 30%, 60% and 100% incentive groups did not differ.     

The Effects of a Combined Goal Setting,Feedback and Incentive Intervention on Job Performance in a Manufacturing Environment

Abstract

Baked anodes are used in finished aluminum production. Employees of a large multinational aluminum smelter were responsible for the production of more than 3500 baked anodes per week. During a 74 week long baseline (A) condition, production of unusable anodes exceeded 300 per week or 8.6 percent of their nominal 3500 anode production requirement. A problem analysis suggested that this high rate of defective anodes might have been due to weak antecedents, inefficient work procedures and weak performance contingencies. An intervention package that included a combination of goal setting, performance feedback, and tangible rewards was designed to strengthen antecedents and consequences of job performance. A performance feedback system was introduced with and remained constant across the three types of performance contingent rewards and three successively higher goal levels. The three reward and goal combinations were introduced to “strengthen” antecedents and performance contingencies within an A-B1-B2-B3-A with reversal to baseline conditions design. Anode reject rates were lower (better performance) during the three intervention phases compared to both the pre- and post-intervention baseline phase data. A dramatic performance improvement (lowered rate of rejects) was observed during the B3 phase that included the highest performance goal. These data demonstrate that a treatment combination of specific goal setting, feedback and tangible rewards can “strengthen” antecedents and performance contingencies resulting in improved objective performance in a manufacturing environment.     

A Review of Public Posting of Performance Feedback in Work Settings

Public posting of employee performance data has been utilized in many work settings to affect a variety of work-related behaviors. Business applications of performance posting, including studies using goal setting and intangible incentives in combination with the performance posting interventions are reviewed. The review indicates that performance posting is an effective feedback intervention for improving employee performance. It was also found that many possible confounds such as training, instructions, self-recording, threats of dismtssal, and increases in social/coworker interaction may contribute to the overall positive effects of public posting on employee performance.     

Shifting the Goalposts? Analysing Changes to Performance Peer Groups Used to Determine the Remuneration of FTSE 100 CEOs

This paper examines year‐on‐year changes to the composition of performance peer groups used for relative performance evaluation in setting CEO pay in FTSE 100 companies and finds evidence of peer selection bias. The authors find that firms keep their peer groups weak by excluding relatively stronger performing peers. They also show that peer selection bias is less pronounced in firms with higher institutional investor ownership, which suggests that institutional investors might be aware of the risks of peer selection bias. The results suggest that peer group modifications can be viewed, at least in part, as an expression of managerial rent‐seeking.     

Relative Performance Evaluation and Risk Taking in Delegated Investment Decisions*

Providing proper incentives to firm managers is increasingly important in the current competitive environment. Analytical research has suggested that evaluating a manager's performance relative to that of a peer group, in conjunction with standard-based pay, can induce efficient risk-sharing between firm owners and managers while maintaining the latter's incentives to exert effort. To date, direct empirical tests of this proposition have not been reported. This study uses a laboratory experiment to test the effect of relative performance evaluation on the risk-aversion of delegated investment decisions. Project-specific risk is operationalized using operating leverage, in part because the variability of a project's operating profits generally increases with this variable, and in part because many of the new manufacturing approaches held to be important to competitive advantage require significant capital investments and attendant increases in operating leverage. Across two levels of environmental uncertainty, subjects under a relative (as opposed to absolute) performance standard selected investments with significantly higher project-specific risk. Also, as environmental uncertainty increased, subjects under an absolute standard significantly reduced the riskiness of their investments. In contrast, subjects shielded from environmental uncertainty by a relative standard chose investments of about equal riskiness under both low and high uncertainty conditions. If supported by future research, these findings would suggest that relative performance evaluation may reduce managers' reluctance to adopt risky capital investments, especially in firms operating in high-risk economic or technological environments.     

On the Need for Rethinking Current Practice that Highlights Goal Achievement Risk in an Enterprise Context

This article addresses the issue of how performance and risk management can complement each other in order to enhance the management of an enterprise. Often, we see that risk management focuses on goal achievements and not the enterprise risk related to its activities in the value chain. The statement “no goal, no risk” is a common misconception. The main aim of the article is to present a normative model for describing the links between performance and risk, and to use this model to give recommendations on how to best structure and plan the management of an enterprise in situations involving risk and uncertainties. The model, which has several novel features, is based on the interaction between different types of risk management (enterprise risk management, task risk management, and personal risk management) and a structure where the enterprise risk management overrules both the task and personal risk management. To illustrate the model we use the metaphor of a ship, where the ship is loaded with cash‐generating activities and has a direction over time determined by the overall strategic objectives. Compared to the current enterprise risk management practice, the model and related analysis are founded on a new perspective on risk, highlighting knowledge and uncertainties beyond probabilities.     

A Comparison of the Effects of a Linear and an Exponential Performance Pay Function on Work Productivity

This study examined how work productivity was affected by the way in which individual monetary incentives were related to performance. Two types of relationships, or performance pay functions, were compared: a linear function in which a specific per piece incentive was provided for each piece completed in excess of a performance standard and an exponential function in which the amount of the per piece incentive accelerated as productivity increased. Forty college subjects were randomly assigned to one of the two pay conditions. Each subject participated in 15 forty-five minute sessions. Subjects performed a computerized work task that simulated the job of a proof operator at a bank, entering the cash values of simulated bank checks using a computer keyboard. The dependent variable was the number of correctly complcted checks. Productivity was comparable for subjects exposed to the linear and exponential performance pay functions, even though subjects exposed to the exponential function earned significantly more money than the subjects exposed to the linear function. The results suggest that, within certain parameters that have yet to be determined, differences in the way in which monetary incentives are related to performance may not differentially affect performance.     

Executive pay, tournaments and corporate performance in UK firms

This paper explores the relationship between executive pay and corporate performance. First, we focus on the pay-for-performance sensitivity (PPS), review recent evidence (mainly UK) and outline a methodology for calculating the PPS itself. Secondly, we review the evidence on tournament theory. Tournament models predict that career concerns generate incentives for executives and can explain observed variations in pay outcomes in the boardroom. Thirdly, we provide evidence on the distribution of the PPS for 532 executives within 100 large UK stock market companies for 1997. Unlike prior work, we include non-CEO executives in the analysis. We show that the PPS increases through organizational levels. Also the statistic is not constant across firms. Finally, we consider the relationship between corporate performance and incentives. We show, consistent with prior evidence, that there is a positive relationship between firm performance and the effective ownership of stock-based compensation by management.     

Goal partitioning in a hierarchical organization

A mathematical model of the resource allocation decision process in a two level decentralized organization is presented. The model and solution procedure are capable of representing a wide range of behavioral situations. Some important aspects of the model are: (1) It allows for informational autonomy at both levels of the organization. (2) The structure of the organization can affect the final decision. (3) The goal setting behavior of the superordinate and the subordinates explicitly accounts for the decision maker's “bounded rationality”. (4) The model explicitly allows for both the superordinate and the subordinates to have their own set of goals. (5) A final decision is reached through an iterative information exchange between the superordinate and the subordinates. (6) The solution procedure leads to a resource allocation plan which reflects both the superordinate's goals and the subordinates' goals.     

The Adverse Consequences of Share-Based Pay in Risky Companies

Shareholders increasingly regard it as desirable to link director pay packages to the share price, in order to align directors’ incentives with those of the shareholders. The result of such remuneration packages is that directors’ wealth will become concentrated in one stock, giving them an undiversified portfolio of shares. The resulting need to diversify will encourage directors to exercise their share options, irrespective of their expectations about future stock price performance. This benefit to diversifying will be greater the riskier the stock. Consistent with this, this paper finds that only option exercises in relatively low risk companies are informed, and precede significantly negative abnormal returns over the following 2-month period. As a result, providing directors in riskier companies with share-based pay packages might not be effective in aligning their incentives with those of the shareholders.     

The Performance Effects of an Ability-Based Approach to Goal Assignment

Some organizations have begun to target their goal-setting method more closely to the ability levels of their employees. In this article, we report the results of a laboratory study of 138 undergraduate students, which shows that these “ability-based” goals are more effective at improving performance than a “one goal for all” approach, where everyone is assigned the same performance target. Results from repeated measure tests and other analysis of variance tests show that lower-ability individuals in the ability-based goal condition outperform those in the one goal for all condition. Lower- and moderate-ability participants in the one goal for all condition also experienced larger decreases in performance in later rounds.