Last week I attended a one-day event at the NYU Stern School of Business, hosted by Ethical Systems and the Behavioral Science and Policy Association.
During one session, “Walking the Tightrope: Balancing Incentives to Perform vs. Incentives to Cheat,” Professor Lisa D. Ordóñez of the University of Arizona talked about goals.
Some conluding questions in an article Professor Ordóñez referenced and co-wrote, “Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal Setting," inspired me to come up with my Ten Commandments of Goal Setting.
Here they are:
1. Don’t be over specific. “Narrow goals can blind people to important aspects of a problem.” Let’s remember, organizational success goes beyond a single performance indicator.
2. Don’t go wild on stretching. The underbelly of a stretch goal is often a penalty for non-performance. Such fear of failure can drive loss aversion and excessive risk-taking, especially where a front-line employee is getting close to the goal. As Georgetown Law Professor Donald Langevoort said during the NYU program, the closer an employee gets to a goal but where it remains “still out of reach” the greater the potential for an irrational calculation of ethical and compliance risk to make plan. In other words, in such a situation, “the fear of demise, real or perceived, is more likely to drive compliance problematic behavior than to solve it.”
3. Watch who sets the goals. Remember, the people who set goals often have the greatest discretion, as well as financial stress, so we shouldn’t forget that they are also vulnerable to unwanted risk-taking.
4. Make sure the time horizon is appropriate. A recent study (pdf) by Institute for Business Ethics addressed how short-term goals and financial targets are one of the greatest causes of corporate misconduct. Be careful to avoid the tunnel vision of the current quarter to the detriment of long term outcomes.
5. Avoid goals that promote excessive risk taking. As Professor Langevoort shared, "The impulses that are want or desired oriented are more automatic than the deliberative process that ethical reasoning takes.” Compliance executives should be a part of goal setting discussions with business unit leaders to make sure compliance programs and goal setting are aligned, and to understand which goals might be setting you up for situational compliance failure.
6. Understand which goals in your business might corrupt your culture. As Professor Langevoort reminds us, “People under stress and pressure can delegitimize messages which are meant to have value.” Understanding where those distortions occur before they hit the field can be a tremendous compliance asset to keep culture strong where it is often at greatest risk -- the front-lines of business.
7. Calibrate goals to individual abilities but preserve organizational fairness. Different people possess different skill sets, and there’s nothing wrong with adjusting goals to the individual as long as it does not degrade the use of common standards to promote a sense of teamwork and fairness.
8. Understand how your goals influence organizational culture. Carsten Tams is the SVP for Ethics and Compliance at Bertelsmann. He shared during a program session that “we need to help people self-actualize their capacity for ethical behavior.” That’s a great way to think about how goals might be bolstering or diluting an employee’s contribution to, and perception of, corporate culture.
9. Make sure your goals promote intrinsic motivation. As Mr. Tams said, "The more we audit and control the less we focus on intrinsic self-governance.” So let’s not forget that we are dealing with people, not data, and heed to Mr. Tams when he recommends “inviting employees to contribute to the compliance dialog as an agent of ethical behavior.”
10. When setting goals, ask yourself what is the ultimate goal of the organization? We work in complex, changing environments. Do static goals address those dynamics, or does there need to be a hierarchy of long and short term goals?
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Jeffrey Kaplan writes and edits the great Coflict of Interest Blog. At the NYU event, he said, "We are not as ethical as we think, so we need smarter ethics and compliance programs of all types.”
Think of someone at the front-lines of international business, tired, jet-lagged, depleted and stressed. In other words, the worst possible moment to make a decision.
If at that point, when the fear of non-performance may be highest, and the pressure to keep and get business the greatest, do your goals and the way you set them send all the right ethical and compliance messages? If they do, then you really have a program that takes hold at what could be its weakest moment. That's the true strength of an effective compliance and ethics program.
Richard Bistrong is a contributing editor of the FCPA Blog and CEO of Front-Line Anti-Bribery LLC. He was named one of Ethisphere's 100 Most Influential in Business Ethics for 2015. He consults, writes and speaks about compliance issues. He can be contacted by email here and on twitter @richardbistrong. He'll be a speaker at the FCPA Blog NYC Conference 2016.