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can be counterproductive.
Being an ardent Deming believer, I'm facing my annual internal philosophical struggle with annual goal setting. We just finished our fiscal year and like most companies, we have developed and announced our goals for the new fiscal year.
Is this goal-setting process a good thing or a counterproductive exercise? I think goals are good for driving small, incremental improvements, but counterproductive for fostering a creative environment that can yield dramatic overhauls and increases in productivity and strategic advantage.
Conventional business thinking is that goal setting is a critical business-planning tool. This line of thinking says that without goals, an organization would be stagnant. When the ISO 9001 standard was updated to the 2000 version, the importance of setting numeric goals was deemed an important part of the quality planning process. The standard states that top management is responsible for setting measurable quality objectives.
How could the ISO 9001 standard have a statement in it that directly contradicts one of Deming's 14 Points for Management? Deming's 11th point states, "Eliminate numerical quotas for the work force" and "eliminate numerical goals for people in management."
Deming argues in his book, "Out of the Crisis," that quotas on the production floor do nothing but hold back the potential for improvement and that management goals are often nothing more than a wish to improve with no real plan to achieve the goal. In both cases, achieving a goal often can be done with a slight incremental improvement or working a little harder.
When the goal is achieved, a success is claimed. The loss is that another method might have yielded dramatic improvement compared to the goal, but it wasn't pursued because the easy-to-achieve goal defined success. By setting low expectations based on the past track record, an organization could be prevented from meeting its potential.
Goal setting creates an environment that stifles creativity that could lead to break-through improvements. If a manager sets a goal for a team to achieve a 10% increase in sales, they will probably come back with minor tweaks to the existing sales process and a plan to work a little harder within the same system.
In the book, "Uncommon Genius," Denise Shekerjian seeks to understand the creative process that leads to break-through innovation. She comments, "What blocks a creative solution to a problem is often an overly narrow and single-minded concentration from a single frame of reference." Goals asking for small, quantified, incremental change tend to reinforce this single frame of reference rather than encourage people to think differently from the status quo. Instead of setting a sales goal, ask employees to consider what sales could be next year if they threw out all existing sales methods and approaches. There is a good chance that this goal-less assignment could yield a 200% increase in sales.
I can't deny that in some circumstances, traditional goal setting can be effective. I once asked a recognized sales consultant about Deming's point on eliminating sales quotas. He replied, "When you spend your day having doors slammed in your face, it's hard to keep going unless you have a quota to drive you." He makes a good point as long as the quota is driving someone to keep going and not holding them back once the goal is met.
Goals can be effective in driving the detailed execution tasks that are part of a plan. Even Deming didn't have an issue with management goals when they were part of a methodology to execute a planned change.
I don't believe that specific, numeric goals are a good strategic tool though. Traditional goals at the strategic level narrowly define the scope of possibilities and make it nearly impossible to develop creative solutions that lead to dramatic improvements. Deming's work with the Japanese vividly illustrates how looking for creative ways to redefine an industry can give tremendous advantage over those looking to make small, safe, incremental strategic improvements each year.