If you have a job, it is probably obvious to you that organizations care about employee performance. You might have performance metrics, sales targets, quarterly forecasts, project objectives, earnings reports, or other types of goals at your work. This is because goal-setting has been found to be one of the most important practices that organizations can use to motivate performance.

For example, a leading financial institution might set a performance goal for its employees to motivate them to sell financial products to customers. To be effective, this goal needs to be specific and difficult. A number like 8 financial products is very specific and also provides a challenge to work for. As an added bonus, it is even easy to remember since “eight is great.” If this example sounds familiar, it is because this is exactly the performance goal that Wells Fargo set for its employees. Unfortunately, this goal motivated not only performance but also unethical behavior. This included a variety of unethical practices such as opening over 1.5 million unauthorized accounts and issuing over 500,000 unauthorized credit cards to customers. After this scandal was uncovered, over 5,000 employees were fired, and Wells Fargo’s CEO resigned.

ADVERTISEMENT

Wells Fargo is certainly not the first organization to have a goal-setting problem. Sears Automotive set hourly sales goals for mechanics who immediately started overcharging customers and making unnecessary repairs. Under pressure to achieve quarterly sales goals, employees at the now-defunct technology company MiniScribe shipped actual bricks to customers instead of hard drives. When leaders at Veterans Affairs set a goal to cut wait times to 14 days, employees created a secret wait list that led to extended wait times for veterans and poor patient care.

The connection between high-performance goals and unethical behavior has also been confirmed in behavioral ethics research. In a recent review, we found dozens of papers demonstrating this effect in various environments. It might be tempting to think that this shows that performance goals don’t work. Yet, perhaps the more useful way to think about this is that goals often work so well that employees do whatever it takes to achieve them. Given these findings, what has been largely missing thus far is insight into how to effectively motivate employee performance without simultaneously motivating unethicality.

To shed light on this, we conducted a series of studies in which we took a closer look at the type of motivation associated with various performance goals. Broadly speaking, people can be extrinsically motivated or intrinsically motivated to perform a task. Extrinsic motivation is about the desire to earn rewards and avoid punishments. Intrinsic motivation is about the desire to perform a task for more personally beneficial reasons such as learning and development. Often, we assume that organizational goals must be extrinsically motivating. For example, produce 100 widgets and earn a financial bonus. However, organizational goals can also be intrinsically motivating. For example, a goal to produce 100 widgets could instead be for the purpose of employees learn new skills, develop their abilities, and track their progress.

ADVERTISEMENT

In a paper recently published in Organizational Behavior and Human Decision Processes, my coauthors and I conducted multiple studies examining both employees with various organizational performance goals and students who we assigned different types of goals. The same pattern of results emerged. Extrinsically motivating performance goals motivated by the attainment of an external reward led individuals to engage in more unethical behavior. This unethical behavior often occurred in order to avoid failing to achieve the goal and thus missing out on the desired reward. Intrinsically motivating performance goals motivated by learning and personal development led to relatively low levels of unethical behavior. After all, cheating to meet a goal doesn’t really help with one’s own development. Additionally, individuals with intrinsically motivating performance goals didn’t have the same worries about avoiding goal failure because even partial progress is valuable for those who are intrinsically motivated. As goal difficulty increased, we found that those with extrinsically motivating goals increased their unethicality to a greater degree, but this did not happen for those who were intrinsically motivated. In terms of performance, intrinsically motivating goals led to performance levels that were just as high as extrinsically motivating goals but without the same unintended side effects.

Given these findings, is it possible for organizations to use performance goals that are intrinsically motivating? In many cases, the answer appears to be yes. For example, in some of our studies, we gave participants an identical performance goal and only altered the underlying motivation associated with the goal. Simply by telling participants that we cared about their learning and development on a performance task rather than the ultimate outcome we substantially reduced cheating. Similarly, organizations that highlight the developmental aspects of performance goals may avoid some of the pitfalls associated with using goals as simply carrots and sticks linked only to final outcomes.

In the aftermath of the Wells Fargo scandal, it has also been reported that Wells Fargo is no longer using performance goals. However, our research suggests that it may be possible to motivate employee performance via goal-setting without motivating unethicality. The key is to focus more on the process of goal pursuit rather than the final outcome associated with goal attainment. We have all seen goals where hitting the target is linked to a big reward and falling just short of the goal provides no incentive. In light of recent research, it is easy to see why such goals produce unintended consequences. Instead, we suggest that using goals designed to intrinsically motivate employees to learn and improve will lead to increased performance without a corresponding increase in unethical behavior.

ADVERTISEMENT

These findings are described in the article entitled Reconceptualizing goal setting’s dark side: The ethical consequences of learning versus outcome goals, recently published in the journal Organizational Behavior and Human Decision Processes.

About The Author

David Welsh is a Professor of Management at Arizona State University, W.P. Carey School of Business.