Wednesday, April 15, 2009

The Problems of Goals

An interesting article from the Boston Globe on the pitfalls of setting goals. The primary problem with (some) goals, it seems to me, is the potential for distorting behavior, something that is more likely to occur if the goal is only a proxy for what you really want to happen. I'm not sure I buy the article's primary example of this, though:
IN THE EARLY years of this decade, General Motors had a goal, and it was 29. Determined to boost its flagging profits and reverse a long, steady fall from postwar dominance, the automotive giant did the natural thing: it set a goal. The company pledged to recapture 29 percent of the American market, the share it had ebbed past in 1999. The number 29 became a corporate mantra, and some GM executives took to wearing lapel pins with the number emblazoned on them.

It didn't work. GM never did regain 29 percent of the market, and today, facing the possibility of bankruptcy, it looks even less likely to do so. The lapel pins are gone, and that number isn't much heard from the company.

And while the causes of GM's woes are many - from poor design to high labor costs to a prostrate economy - industry analysts argue that one of the most damaging things the company did was to set that goal.

In clawing toward its number, GM offered deep discounts and no-interest car loans. The energy and time that might have been applied to the longer-term problem of designing better cars went instead toward selling more of its generally unloved vehicles. As a result, GM was less prepared for the future, and made less money on the cars it did sell. In other words, the world's largest car company - a title it lost to Toyota last year - fell victim to a goal.
Did GM fall victim to a goal, or did it fall victim to shortsighted means of achieving that goal? What would have happened if the executives at GM had decided that the best way to achieve a 29% market share was precisely to address the "longer-term problem of designing [and producing, I might add] better cars"?


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