This document discusses goals and goal setting theory in organizations. It covers: 1. The two main purposes of goals - to provide a framework for managing motivation and as an effective control device for management. 2. Key aspects of goal setting theory including goal difficulty, specificity, acceptance, and commitment and how these attributes shape performance. 3. Management by Objectives (MBO) as a collaborative goal setting process where goals cascade down the organization. 4. Research has found goal difficulty and specificity are closely associated with performance, though other elements like acceptance and commitment have been less studied.

2. Two purposes of goal:
1. They provide a useful framework for
managing motivation. Managers and
employees can set goals for themselves and
then work toward them.
2. Goals are an effective control device (control
meaning the monitoring by management of how
well the organization is performing).

3. A person who achieves a goal will be
proud of having done so whereas a person
who fails to achieve a goal will feel
personal disappointment, and perhaps
even shame. People’s degree of pride or
disappointment is affected by their self-
efficacy, the extent to which they feel that
they can still meet their goals even if they
failed to do so in the past.

4. Social learning theory provides insights
into why and how goals can motivate
behavior. By setting goals for people in
the organization, a manager should be
able to influence their behavior. In the
original version of goal-setting theory, two
specific goal characteristics – goal difficulty
and goal specificity – were expected to
shape performance.

5. Goal Difficulty – is the extent to which a
goal is challenging and requires effort. If
people work to achieve goals, it is
reasonable to assume that they will work
harder to achieve more difficulty goals. A
more realistic but still difficulty goal –
perhaps a 20 percent increase in sale s-
would probably be a better incentive.

6. Goal Specificity – is the clarity and
precision of the goal. A goal of “increasing
productivity” is not very specific, whereas a
goal of “increasing productivity by 3
percent int eh enxt six months” is quite
specific. Some goals, such as those
involving cots, output, profitability, and
growth, can easily be stated in clear and
precise terms.

7. Goal Difficulty
Goal
Acceptance
Organizational
Support
Intrinsic Rewards
Goal-Directed
Effort
Performance
Goal
Specialty
Goal
Commitment
Individual
Abilities and
Traits
Extrinsic
Rewards
Satisfaction
FIG. THE GOAL-SETTING THEORYOF MOTIVATION

8. The expanded theory argues that goal-directed
effort is a function of four goal attributes:
difficulty and specificity (previously discussed),
and acceptance and commitment.
 Goal acceptance is the extent to which a
person accepts a goal as his or her own.
 Goal commitment is the extent to which her
or she is personally interested in reaching the
goal.

9. MBO (Management by Objectives) – is
essentially a collaborative goal-setting
process through which organizational goals
systematically cascade down through the
organization

10.  First, The overall goals are communicated to
everyone. Then each manager meets with each
subordinate. During the meetings the manager
explains the unit goals to the subordinate, and the
two together determine how the subordinate can
contribute to the goals mots effectively.
 Finally, manager and subordinate ensure that the
subordinate has the resources needed to reach his
over her goals. The enter process flows downward
as each subordinate manager meets with his or
her own subordinates to develop their goals.

11.  Goal – setting theory has been widely tested
in a variety of settings. Research has
demonstrated fairly consistently that goal
difficulty and specificity are closely associated
with performance. Other elements of the
theory, such as acceptance and commitment,
have been studied less frequently. Some
managers do not really let subordinates
participate in goal setting but, instead, merely
assign goals and order subordinates to
accept them.

13. The core of performance management is
the actual measurement of the
performance of an individual or group.
1. Evaluates an employees work behaviors by
measurement and comparison with previously
established standard,
2. Documents the results, and
3. Communicates the results to the employe

14. ORGANIZATIONAL PROCESSES AND ACTIVITIES
Total Quality Management
Timing and
Frequency of
Evaluations
Determination of
Who Appraises
Whom
Measurement
Procedures
Storage and
Distribution of
Information
Recording
Methods
PERFORMANCE MEASUREMENT
Manager Employee
THE PERFORMANCE MANAGEMENT SYSTEM (PMS)

15. PURPOSES OF PERFORMANCE MEASUREMENT
- The ability to provide valuable feedback is one
critical purpose. Feedback, in turn, tells the
employee where she or he stands in the eyes of the
organization.
 Providing job performance feedback is the primary
use of appraisal information. Performance
appraisal information can indicate that an
employee is ready for promotions or that he or she
needs additional training to gain experience in
another area of company operations.

16. Basic Purpose of Performance Measurement:
Provide Information About Work Performance
Judgment of Past
Performance
Development of Future
Performance
Provide a basis for reward allocation
Provide a basis for promotions,
transfers, layoffs, and so on
Identify high –potential employees
Validates selection procedures
Evaluate previous training programs
Foster work improvement
Identify training and development
opportunities
Develop ways to overcome obstacles
and performance barriers
Establish supervisor-employee
agreement on exceptions
Purposes of Performance Management

17. Employee appraisals are common in every
type of organization, but how they are
performed may vary. Many issues must be
considered in determining how to conduct
an appraisal. Three of the most important
issues are who does the appraisals, how
often they are done, and how performance
is measured.

18. The Appraiser - the employee’s primary
evaluator is the supervisor. This stems
from the obvious fact that the supervisor is
presumably in the best position to be
aware of the employee’s day –to-day
performance.
Frequency of the Appraisal – the type of
tasks being performed, or the employee’s
need for information on performance, the
organization usually conducts performance
appraisals on a regular basis, typically
once a year.

19.  Measuring Performance – the measurement method
provides the information managers us to make decisions
about salary adjustment, promotion, transfer, training, and
discipline. Some of the most popular methods for evaluating
individual performance are graphic rating scales, checklists,
essays or diaries, behaviorally anchored rating scales, and
forced-choice systems.
Two major problems
1. A tendency to rate most individuals at about the same level
2. The inability to discriminate among variable levels of
performance.

21. Reward system consists of all
organizational components –
including people, processes, rules
and procedures, and decision –
making activities – involved in
allocating compensation and benefits
to employees in exchange for their
contributions to the organization.

22. The purpose of the reward system in most
organizations is to attract, retain, and
motivate qualified employees. The
organizations’ compensation structure
must be equitable and consistent to ensure
equality of treatment and compliance with
the law.

23.  The organization needs to decide what type of
behaviors or performance it wants to encourage
with a reward system because what is rewarded
tends to recur. Possible behaviors include
performance, longevity, attendance, loyalty,
contributions to the “bottom line”, responsibility,
and conformity.
 A reward system must also take into account
volatile economic issues such as inflation, market
conditions, technology, labor union activities, and
so fort.

24. 1. Base Pay – the most important reward for
work is the pay they receive.
Money is important because of the thing it
can buy, but as we just noted, it can also
symbolize an employee’s worth. Pay is
very important to an organization for a
variety of reason.

25.  Example:
• Piecework programs – which tie a worker’s earnings to the
number of units produced
• Gain-sharing programs, which grant additional earnings to
employee or work groups for cost-reduction ideas
• Bonus systems, which provide managers with lump-sum
payments from a special fund based on the financial performance
of the organization or a unit.
• Long term compensation, which gives managers additional
income based on stock price performance, earning per share, or
return on equity
• Merit pay plans, which base pay raises on the employees
performance.
• Profit – sharing plans, which distribute a portion of the firm’s
profits to all employees at a predetermined rate
• Employee stock option plus, which set aside stock in the
company for employees to purchase at a reduced rate

26. Typical benefits
Payment for time not worked
Social Security contributions
Unemployment compensation
Disability and workers compensation
benefits
Life and health insurance programs
Pension or retirement plans

27.  Perquisites - special privileges awarded to
selected members of an organization, usually top
managers. This decision has substantially change
the nature of these benefits, but they have into
entirely disappeared, nor are they like to.
 Awards - employees receive awards for
everything form seniority to perfect attendance,
from zero defects (quality work) to cost reduction
suggestions. Award programs can be costly in the
time required to run them and in money if cash
awards are given.

28. The organization must consider its
ability to pays employees at certain
levels, economic and labor market
conditions, and eh impact of the pay
system on organizational financial
performance.

29. ISSUE IMPORTANT EXAMPLES
Pay Secrecy Open, closed, partial
Link with performance appraisal
Equity perceptions
Employee Participation By human resource department
By joint employee / management
committee
Flexible system Cafeteria – style benefits
Annual lump sum or monthly bonus
Salary versus benefits
Economic and Labor Inflation rate
Market Factors Industry pay standards
Unemployment rate
Impact on Organizational Increase in costs
Performance Impact on performance
Expatriate Compensation Cast-of-living differentials
Managing related equity issue

30. END