When negotiation goals backfire

By PON Staffon / Business Negotiations, Daily

Adapted from “Managers: Think Twice Before Setting Negotiation Goals,” first published in the Negotiation newsletter, May 2009.

In the years leading up to its collapse, energy-trading company Enron promised its salespeople large bonuses for meeting challenging revenue goals. This focus on revenue rather than profit contributed to widespread fraud and, ultimately, to the firm’s downfall.

To encourage the negotiators they supervise to do their best, managers routinely rely on performance benchmarks, the promise of bonuses, and other types of goals. But far from being a cure-all, negotiation goals can trigger a variety of destructive behaviors, write professors Lisa D. Ordóñez (University of Arizona), Maurice E. Schweitzer (University of Pennsylvania), Adam D. Galinsky (Northwestern University), and Max H. Bazerman (Harvard University) in an article in the Academy of Management Perspectives.

Hundreds of research experiments suggest that setting specific, challenging goals can inspire employees and improve organizational results. But these findings, achieved in controlled settings, fail to account for the pressures and temptations of the real world. Given the pitfalls of goals, managers would be wise to think long and hard before using them. Here are several questions that Ordóñez, Schweitzer, Galinsky, and Bazerman advise managers to answer before implementing goals, as well as steps you can take to address goal pitfalls:

1.    “Is the goal too specific?” Ensure that goals incorporate all the factors that will help your organization succeed.
2.    “Is the goal too challenging?” Give employees the skills and training they need to meet goals, and avoid harsh punishment if they fail to meet them.
3.    “Does the goal have the right time horizon?” Avoid setting short-term goals, which could backfire on your organization over time.
4.    “Does the goal promote risky or unethical behavior?” Clarify acceptable levels of risk, set up strong oversight, and communicate the high costs of cheating.
5.    “How will the goal affect our organization’s culture?” To promote cooperation, consider setting team negotiation goals rather than individual ones.