Motivating employees without unintentionally encouraging unethical behaviors

Is it possible to set high-performance goals for employees without creating an atmosphere of unethical conduct? David Welsh, assistant professor of management and entrepreneurship, and his colleagues found that yes, it’s possible.

Performance goals are standard operating procedure in most companies, large or small, private or public — objectives agreed upon between employees and employers to obtain specific job tasks that ultimately benefit an organization in the long run. 

And, in many cases, the prevailing practice is the greater the goal, the better the performance.

But often in business, the quest to perform at a high level drives employees, and ultimately employers, to act unethically when pursuing lofty goal-setting measures. 

Is it possible to set high-performance goals for employees without creating an atmosphere of unethical conduct?

The dark side of performance

David Welsh, assistant professor of management and entrepreneurship, and colleagues delved into the characteristics of goal-setting associated with suspect behavior in a study to argue that yes, it’s possible.

The results of their research efforts were published in Organizational Behavior and Human Decision Processes in a paper titled “Reconceptualizing Goal Setting’s Dark Side: The Ethical Consequences of Learning versus Outcome Goals.”

“This paper examines how you can motivate performance without motivating unethical behaviors,” explains Welsh.

What their research reveals, which extends a large literature in the field of goal-setting, is it’s the type of performance goal, not just the degree of difficulty, which contributes to a culture of unethical behavior.

The researchers examined two types of performance goals — learning and outcome — in their quest to demonstrate that outcome goals as performance drivers and an over-reliance on goal difficulty to motivate employees have contributed to a nefarious cloud hanging over the business of goal-setting.

A learning goal is one established for the sake of learning and self-improvement, an intrinsic process — the journey — in which employees acquire new skills and knowledge. For example, taking a computer class to learn how to effectively use a new sales software program. 

On the other hand, outcome goals are designed to measure competency based on meeting an external standard — the destination — such as closing a certain amount of sales deals or building a specific number of qualified leads in a certain timeframe. 

Goals at all costs

While Welsh and his colleagues agree that performance goals are powerful motivating tools, their research backs the concept that, by nature, an outcome-based performance mentality creates a prevention focus where employees will do anything to avoid poor performance and goal failure.

It’s a shady mindset that leads people to cheat and take shortcuts in the name of achieving a goal. And the assumption is that to solve the problem of unethical behavior you just need to eliminate or reduce difficult goals or make them super easy so employees aren’t motivated to do the bad things, according to Welsh.

“Our research explains that the problem is the focus of the goal itself. It’s the wrong type of goal. You’re focusing on outcome goals, telling employees to cross-sell eight of these products or make 100 widgets; give me whatever outcome there is and that’s all I want to see or care about,” he says.

“In contrast, if you give people the same goal and tell them it’s about their personal development and you want them to improve and get better at doing these things — the process of attaining a goal rather than outcome — all of a sudden they are intrinsically motivated rather than extrinsically motivated. What you get is performance but with much lower rates of unethical behavior.”

To support their theory that goal type influences a propensity for unethical activity, not only goal difficulty, the researchers surveyed employees from multiple industries who were polled on real-world goal types. They also conducted experimental studies with different types of performance goals in which participants had the opportunity to cheat in order to achieve the goal.

A pattern emerged across all evaluations, which involved both field and controlled analysis, that learning goals reduce prevention focus and unethical behavior without decreasing performance, even when goals are difficult.

“What we found in our research is when employee are focused on outcomes, they feel concerned about failure to hit a goal. They think, ‘I’m going to fall short of a performance objective. I’m not going to hit the numbers, so I’m going to do whatever it takes to dig out from that.’ ” says Welsh. 

“If they can’t do it through legitimate means, they look for some other possible route to achieve a goal and an unethical behavior presents itself to do that.”

Fear of failure at all costs

Wells Fargo is a perfect illustration of how performance goals based on outcome results can cause immeasurable harm in the wake of a company’s efforts to succeed, according to Welsh. 

In 2016, the banking institution was fined $175 million due to a scandal in which the CEO resigned and more than 5,000 employees were fired for opening up phony bank and credit card accounts driven by a desire to hit sales targets and receive bonuses. The fees collected on the fake accounts increased Wells Fargo’s bottom line and enhanced employee sales figures over several years. 

“Top management wanted to boost performance so to motivate employees they gave them very aggressive sales goals. Instead of selling products the employees ended up opening unauthorized customer accounts. Besides reputation, it affected every level of the organization,” he says.

The banking industry, though, is hardly alone in goal-setting that can undermine ambitious business objectives. It’s just one of the more recent examples of a company going off the rails in pursuit of performance. “Banking, sales, tech — any industry that use metrics and numbers are at risk for this type of goal-directed unethical conduct,” says Welsh.

Furthermore, findings from their study don’t suggest companies like Wells Fargo and other businesses who have been caught up in headlining ethics scandals need to entirely scratch their performance goals, according to Welsh. “We focus too heavily on external goals. Companies need to also motivate employees intrinsically in performance goal-setting. A balance is needed,” Welsh says.

“If you just focus on the end goal and not the process itself, you will set yourself up for unethical behavior. The focus is too narrow and your goals are going to take you off track. Instead, focus on the development of employees, maybe involving them in the process to help avoid unethical behavior. If you can change the focus in that way, you’ll be better able to motivate your employees without also facilitating unethical behavior.”