smartKPIs.com Performance Architect update 8/2010

Applying Goal Setting Theory in practice: An action research exercise

In my previous updates I highlighted the importance of theory in performance management and introduced the goal setting theory as one of the most important informing the discipline. I also outlined the importance of understanding the complexities of setting targets.

At smartKPIs.com, we not only enjoy thinking and talking about performance management, but we also apply performance management concepts in our own work. Today’s update illustrates how goal setting theory was used in practice by the smartKPIs.com team through an action research exercise.

Situation: At the beginning of November 2009, the database of performance measures on www.smartKPIs.com had 600 published KPI examples. The growth rate of the database was constant in November and December, however limited and not optimized..

Challenge: To make the website content more relevant to the diverse profile of visitors, we needed to accelerate the rate at which new KPI examples were published.

Methodology: apply the Look, Think and Act routine of Action Research (Stringer, 2007)

* Look – we gathered relevant information and developed a rich picture of the various functional areas and industries part of the smartKPIs.com taxonomy.
* Think – we analyzed the documentation process and clarified the issues to be addressed
* Act – we established a plan, implemented it and evaluated results

Theory: use Goals Setting Theory principles (Locke & Latham, 1990)

Application of Goal Setting Theory principles:

  • Challenging but attainable. We established an overall target for the entire documentation team: Double the number of published KPIs in one month. From 1000 at the end of December 2009 to 2000 published KPI examples by the end of January 2010.
  • Specific rather than vague. We were aware that such a challenging target might lead to a decrease in the quality of the content. This risk was addressed by clarifying that the target had to be achieved while respecting the high quality standards characterizing the KPI examples documented on http://www.smartKPIs.com. This was reinforced by the establishment of work package with clear quality and quantity specifications.
  • Involvement of team members in the process of setting their own targets. We decided to split this target by working days and established the daily target number of KPIs for the team. This was divided by team member, taking into account the proportion of working hours allocated to this task each day. These targets were discussed and some of the team members adjusted them upwards, based on the level of difficulty of their allocated work package.
  • Ensure targets are measurable in terms of being clearly understood by employees: quantity, quality, time and cost. A spreadsheet was established to clarify daily targets and keep track of the progress. Weekly meetings were used to discuss progress, share learnings and adjust work packages.

Results:

* January 2010 – The target was met on the last day of the month: 1000 KPI examples were published in a 4 weeks period, as planned.
* February 2010 – The target was met one week before the deadline, confirming that the previous month result was due to an improved process, easily replicated from one period to another.

Outcomes: Performance management is more than just ensuring outputs are delivered as planned. It is also about using such outputs to deliver outcomes that generate added value. Here is how the output of 2000 KPIs published as planned during the last two months is generating value for smartKPIs.com:

1. The traffic to http://www.smartKPIs.com increased considerably. In February 2010, smartKPIs.com established a new site record in terms of daily visitors.
2. The traffic to the website remained constant even after stopping the advertising campaign we rolled out last year. After a brief decrease, the volume of visitors started to gain momentum. While other factors contributed to this, certainly the quality content published over the last two months, had its share in attracting new visitors. Thus the financial value generated by the added content can be estimated as the equivalent of a large share of our advertising budget for two months.
3. The continuous improvement of the quality and quantity of the content consolidated the recognition smartKPIs.com has started to have the international performance management community as a global platform for performance management knowledge integration.
4. Internally, the learning experience team members shared during this exercise contributed to the generation of new ideas and innovation, such as the launch of the Performance Management IQ test.
5. The experience itself and the achievement of targets confirmed the talent, dedication and work ethic of the smartKPIs.com team. It gave a sense of pride and satisfaction of getting the job done. Having the opportunity to plan, deliver and excel is in itself a powerful motivator and enabler of self efficacy. It is a story worth telling others: “…In December 2009, while working with the smartKPIs.com team on growing the website, we were faced with this challenge…We were a great team…And we did exceptional things…”

After all, as Albert Einstein said: “The value of achievement lies in the achieving.”

Notes:

No bonuses were paid for achieving the targets set as part of this exercise.
No paper was printed as part of the measure documentation process.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

References

Locke, E. A., & Latham, G. P. (1990). A theory of goal setting and task performance. Englewood Cliffs, NJ: Prentice Hall.

Stringer, E. T. (2007) “Action Research, 3rd Edition“, Thousand Oaks, CA, Sage Publications.

smartKPIs.com Performance Architect update 7/2010

Setting targets, cooking steak and using thermometers

Setting targets is relatively easy if you want to make it easy – just pluck a number from the air, make it your target and strive to achieve it. However, there is more to target setting than a simple number selection.

One of the first things to be clarified when using target is why they are used. The answer might seem intuitively simple: to facilitate their achievement. Still, there are more reasons to using targets.

One of my favorite metaphors regarding using targets is the thermometer. Thermometers are used in multiple ways:

  • To check if the temperature is within certain limits. In medicine 37° Celsius / 98.6° Fahrenheit is considered the average healthy temperature of a healthy human body. In a way it can be considered a target, however a flexible one, based on a variance interval around it.
  • To ensure the temperature meets a specific value. For example, in cooking some dishes require a specific temperature to be reached as per the recipe. In this case, meeting the target temperature is required for the successful preparation of the dish.

Similarly, in other aspects of human administration, such as business, targets can be set for multiple reasons:

  • To learn – targets provide a good reference point for evaluating achievement and comparing results.
  • To motivate their achievement – as per the principles outlined by the Goal Setting Theory
  • To control / ensure compliance – to verify the achievement of a specific limit required as part of the successful delivery of a business plan.

In time, the latter two reasons worked hand in hand to overshadow the learning aspect of target setting. They work fairly well in the short term and bonuses based on meeting short term targets have become the norm in business. However, their long term impact is in many instances less positive. The Global Financial Crisis is only an example of the manifestation in practice of this thinking.

Coming back at the thermometer metaphor is as we would use thermometers only to check the temperature of the steak we are cooking (satisfying our short term hunger), having forgotten to also using them to monitor the temperature of our body, for long term health benefits. In practice (medicine and manufacturing) this is not the case – thermometers used in equal measure for learning and ensuring compliance. In business administration it is as if we have forgotten about the learning aspects of target setting… Reward and recognition driven target setting is the norm.

The implications at cultural level are important. Targets for control in many instances result in a dangerous combination of human greed and mechanistic behavior. This combination, coupled with ineffective risk management is one of the factors that contributed to the demise of many organizations in recent history. Having a good steak is generally easier and more appealing than monitoring health and learning about ourselves.

Fortunately, the body has the ability to self regulate temperature. Organizations, on the other hand don’t have a mature self-regulation system, again mainly due to the relatively low level of sophistication of organizational culture today. As a result rewards and recognition target setting seems to be a relic of 19th century management prehistory, a reflection of our inability to find the right balance in human organizations. After all, it took hundreds of years to evolve the thermometer to its current form. Scientific management has been around for less than 100. Maybe it is just a question of time.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

smartKPIs.com Performance Architect update 6/2010

An introduction to theory in performance management: Goal Setting Theory

In my previous update I highlighted the benefits of increasing theory awareness in performance management practice. It has the potential to positively impact the process of selecting, developing and using performance management solutions. Over the next few months, I will gradually introduce some of these theories, in no particular order.

A very important theory informing performance management is the Goal Setting Theory, which is considered to be one of the most effective motivational theories. It was formulated inductively based on empirical research conducted over nearly four decades by Locke and Latham. Its roots are based on the premise that conscious goals affect action (Locke & Latham, 2002).

An important note to make is that the use of the term “goals” in this theory. Goals are considered here to be the object or aim of an action. As the terminology used in performance management as a discipline is loosely structured, the goal setting theory itself applies to objectives, Key Performance Indicators and targets as well.

Principles

There are four general principles that are linked to an increase in motivation, thus generating optimal performance:

  • Goals should be challenging, but attainable. Locke and Latham (2004) found a positive, linear function in that the most difficult goals produced the highest levels of effort and performance. They also found that performance decreased once the limits of ability were reached or when commitment to a highly difficult goal lapsed.
  • Goals should be specific rather than vague. Research by Locke and Latham (1990) showed that specific, difficult goals consistently led to higher performance than urging people to do their best. As specific goals vary in difficulty, goal specificity in itself does not necessarily lead to high performance, but reduces variation in performance by reducing the ambiguity about what has to be achieved. (Locke, Chah, Harrison, & Lustgarten, 1989).
  • Employees should be involved in the process of setting their own goals. When goals are self set, people with high self-efficacy set higher goals than do people with lower self-efficacy. They also are more committed to assigned goals, find and use better task strategies to attain the goals, and respond more positively to negative feedback than do people with low self-efficacy (Locke & Latham, 2002, Locke & Latham, 1990). The goal–performance relationship is strongest when people are committed to their goals.
  • Goals should be measurable in terms of being clearly understood by employees: quantity, quality, time, and cost. For goals to be effective, people need summary feedback that reveals progress in relation to their goals. If they do not know how they are doing, it is difficult for them to adjust the level or direction of their effort or to adjust their performance strategies to adjust their performance strategies to match what the goal requires. Summary feedback is a moderator of goal effects in that the combination of goals plus feedback is more effective than goals alone (Locke & Latham, 2002).

Mechanisms

Locke & Latham (2002) propose four mechanisms through which goals affect performance:

1. Directive function. They direct attention and effort toward goal-relevant activities and away from goal irrelevant activities.
2. Energizing function. High goals lead to greater effort than low goals.
3. Impact on persistence. When participants are allowed to control the time they spend on a task, hard goals prolong effort (LaPorte & Nath, 1976). There is often, however, a trade-off in work between time and intensity of effort. Faced with a difficult goal, it is possible to work faster and more intensely for a short period or to work slower and less intensely for a long period.
4. Affect action indirectly by leading to the arousal, discovery, and/or use of task-relevant knowledge and strategies (Wood & Locke, 1990).

While Goal Setting Theory is generally analyzed at individual level, its principles are considered relevant at organizational level, too. Locke (2004) argues that goal-setting is effective for any task where people have control over their performance. Research in this field currently explores goal setting theory at both individual and organizational level. Elements of the Goal Setting Theory are present in various degrees in all aspects that relate to performance management practice. Linking theory to practice is up to all of us.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

References

LaPorte, R.E., & Nath, R. (1976). Role of performance goals in prose learning. Journal of Educational Psychology, 68(3), 260-264.

Locke, E. A., Chah, D., Harrison, S., & Lustgarten, N. (1989). Separating the effects of goal specificity from goal level. Organizational Behavior and Human Performance, 43, 270–287.

Locke, E. A., & Latham, G. P. (1990). A theory of goal setting and task performance. Englewood Cliffs, NJ: Prentice Hall.

Locke, E. A. and Latham, G. P., (2002), “Building a Practically Useful Theory of Goal Setting and Task Motivation”, American Psychologist, Vol. 57, No. 9, pp. 705–717.

Locke, E. A. (2004), “Goal setting theory and its applications to the world of business”, Academy of Management Executive, Vol. 18, No. 4, pp. 124-125.

Wood, R., & Locke, E. (1990). Goal setting and strategy effects on complex tasks. In B. Staw & L. Cummings (Eds.), Research in organizational behavior (Vol. 12, pp. 73–109). Greenwich, CT: JAI Press.