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Kai Ryssdal: If you work in a place that’s got a halfway decent performance review system, you know all about companies setting goals. Just as in personal life, they can be a good thing for businesses to have. Goals can keep people focused, give ’em a target to shoot for. But if you don’t use those goals right, things can go pretty far wrong, as Marketplace’s Sean Cole explains.
SEAN COLE: Things are different now. That’s what General Motors keeps saying. It said so at the Detroit Auto Show this week, and on a surprisingly interesting conference call with the media last month. GM is literally a different company since emerging from bankruptcy protection.
SUSAN DOCHERTY: And what’s different here is that in the old GM we had a tendency to buy our market share.
This is Susan Docherty, the new VP of sales for North America. By “buying market share,” she means offering lots and lots of incentives, 0-percent financing and the like.
DOCHERTY: I’m certainly not proud of the fact that we’ve been the incentive leader. There’s lots of things I’d like to be a leader in, and it certainly isn’t in incentives.
The reason this is interesting is that about 10 years ago, GM had a goal. And it used all of those incentives to try to reach it. The goal was attaining 29 percent market share, which it hadn’t reached for a couple of years at that point. According to legend, GM was so focused on this goal that its employees wore these pins.
TOM WILKINSON: Um, it was just a small gold lapel pin with the number 29 on it.
This is Tom Wilkinson, a spokesman for GM. The company never did attain 29 percent. Though it came close in 2002 with 28.3 percent market share, which is what I don’t get. GM seemed to be fetishizing this particular number.
WILKINSON: No I think some people in the press were fetishizing it. I wouldn’t take the pins too seriously. It was a stretch goal.
That is, a goal beyond your usual abilities.
WILKINSON: There’s nothing wrong with stretch goals. People internally know what they are. It’s like telling your kid, “Hey I’d like you to see if you can get A’s in all of your classes.” You know what’s wrong with that?
I’ll tell you what’s wrong with it, says Lisa Ordonez, a management professor at the University of Arizona.
LISA ORDONEZ: I’ve actually seen that particular instance of children and students who have these stretch goals of all A’s, especially if you incentivize them, like paying for all A’s, can lead to unethical behavior like cheating on an exam or having someone write a paper for you.
Ordonez is one of four academics who released a paper last year called “goals gone wild.” Now she’s not suggesting that GM cheated or did anything unethical. But she says the example of the company lowering prices, etc., to sell a certain number of cars, it just shows how goals can get you into trouble.
ORDONEZ: And this led to, for them, a focus away from profitability. And to achieve this goal myopically. Now I’m not going to say that that goal was the entire downfall of GM, but obviously strict adherence to goals can cause these kinds of problems.
Problems like ignoring other more important goals such as customer service or product quality. Also different employees are motivated differently. Goals don’t always work. And, yes, there’s the cheating. Ordonez told me about a company called Miniscribe, which I had never heard of.
ORDONEZ: Well there’s probably a very good reason why you haven’t heard of Miniscribe. They’re now a defunct company that had set sales target goals.
It was a hard-drive manufacturer. Turns out the sales were real, but the products weren’t.
ORDONEZ: At the time, this was a while back when hard drives were about the size and weight of a brick. And so they mailed boxes full of bricks. To…
ORDONEZ: To mimic actual sales so they could achieve specific goals based on revenues.
Now this is a very extreme example and detractors of this research say it’s just a bunch of extreme examples supporting a dubious premise. But Ordonez and her colleagues aren’t saying don’t use goals. They’re just saying be wary of how you use them and which goals you set. And while Tom Wilkinson at GM rejects the professor’s opinion of the company’s actions back in the day…
WILKINSON: It’s a gross over-simplification of the complexities that GM was facing 10 years ago.
The new president for North America, Mark Reuss, used the “29” pins as an example of what GM is not doing now.
MARK REUSS: We’re not printin’ pins. We’re not doing any of that stuff.
And if you ask both of these guys what GM’s goals are at the moment, they say the same thing.
REUSS: To make, build and sell better vehicles than anybody else.
WILKINSON: Design, build and sell the world’s best vehicles.
And if they can do that, the market share will take care of itself.
I’m Sean Cole for Marketplace.
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