When we talk about measuring impact, evaluating nonprofits or how to compensate nonprofit executives, we are implicitly talking about setting goals. Unless you have a goal, you cannot measure your progress towards reaching it. Right?
But it seems that setting goals can be dangerous. In a recent Harvard Business School working paper titled Goals Gone Wild (hat tip Phil Cubeta) the authors make the case that setting goals can be counterproductive.
From the article:
“In this article, we argue that the beneficial effects of goal setting have been overstated and that systematic harm caused by goal setting has been largely ignored. We identify specific side effects associated with goal setting, including a narrow focus that neglects non-goal areas, a rise in unethical behavior, distorted risk preferences, corrosion of organizational culture, and reduced intrinsic motivation. Rather than dispensing goal setting as a benign, over-the-counter treatment for motivation, managers and scholars need to conceptualize goal setting as a prescription-strength medication that requires careful dosing, consideration of harmful side effects, and close supervision. We offer a warning label to accompany the practice of setting goals.”
The gist of the article is that when you set a goal, you tend to pursue it at the expense of everything else. This can be a good thing if the goal is very well defined and captures the core of what you are trying to achieve. But it can also literally blind you to other important things that are going on. Don’t believe me? Check out this video to see how dramatic your blindness can be.
So here’s the thing, when we try and achieve impact and measure it, we need to be very careful in how we define impact. For instance, defining a “good nonprofit” by looking at the ratio of overhead costs to program costs ends up systematically starving nonprofits of the resources they need to grow. Oops. Incentivizing bankers to make mortgage loans without regard to the borrowers ability to pay it off broke our economy. Oops.
Does this mean goals are bad? No, but it does mean that, as the HBS paper states, goals are “prescription-strength medication that requires careful dosing, consideration of harmful side effects, and close supervision.”
Powerful tools are usually dangerous if used incorrectly, so this should be no surprise. But when we incentivize people to achieve certain goals, we better make sure they are the right ones. Otherwise we might just accomplish the wrong thing.
Sean Stannard-Stockton is a principal and director of Tactical Philanthropy at Ensemble Capital Management. Ensemble Capital provides families both traditional investment management and philanthropic planning. He is the author of the blog Tactical Philanthropy and writes the column Tactical Philanthropy for the Chronicle of Philanthropy.