Leading for Innovation: And Organizing for Results

8.2. Don't Set Quantitative Goals and Overemphasize Budgets

Closely related to the idea of accountability is the idea of goal setting. Yes, I know there is a large literature on goal setting that shows its positive, motivational consequences. But these good effects occur primarily at the individual level when the goals are realistic, people have the training and resources to achieve them, and the goals are sufficiently challenging. In many organizations, budgets become constraints on doing what needs to be done, and performance objectives constrain rather than motivate performance.

These bad effects don't hamper the performance of AES, a global independent power producer that has been enormously successful since its founding in the early 1980s. ...