Goal-setting in Organizations

Goal-setting can be a powerful driver of performance and many hierarchical organizations rely on it to improve organizational performance. When tasks and task-interdependencies are well-understood, goals can facilitate coordination as much as motivation. In contrast, when tasks are not well-understood and involve non-trivial interdependencies – as typically observed in complex or changing business environments – it is rarely possible to assign goals in a way that avoids some level of goal-conflict. While specific and ambitious goals may still motivate individuals, the same goals are likely to create conflict among organizational members. We employ a series of computational simulations to analyze how organizations should set individual-level goals and define an organizational goal structure that supports the pursuit of these goals. Specifically, we show that the joint choice of goal distribution (how many goals, specific or vague) and goal priority (whose goals are most important) in combination with the choice of goal structure (in terms of breadth and depth) results in an efficiency frontier. Different choices become optimal depending on the need to balance the quality of the outcome and the effort spent obtaining it. The results have significant implications for organization designers and the management of organizations.