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Charting Their Own Path

A recent study found employees setting their own performance targets performed nearly 40 percent better than employees who were assigned goals. Experts say the employee-directed goal management approach can be advantageous, but HR must work with managers and workers to identify objectives that are fair to the employee and organization alike.

Monday, July 15, 2013
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"If we build it, we love it more."

This idea is the essence of what a group of researchers call the "IKEA Effect," according to Tim Houlihan, vice president of the rewards system group with BI Worldwide, a Minneapolis-based marketing and advertising firm with specialties including employee engagement and sales incentives.

A team of researchers from Duke University, Harvard Business School and Yale University coined the term "IKEA Effect" – named for the popular Swedish retailer of ready-to-assemble furniture – after finding that a group of research subjects placed more value on products or items they constructed themselves.

Perhaps the IKEA Effect helps explain why a recent BI Worldwide study found employees who set their own goals outperforming another group of workers who were assigned goals -- by a 37 percent margin.

In the study, 256 employees spread across four call centers were tasked with selling more products and services to the customers they serve. Overall, 136 of these employees were allowed to choose their goals, while the remaining 120 workers were assigned goals.

"More sales equated to more performance," says Houlihan, adding that each participant's goals were relevant to their baseline performance. "Simply put, those who selected their own goals sold more products and services."

This result shouldn't come as a great shock, says Linda Ginac, founder and CEO of TalentGuard, an Austin, Texas-based talent management software and consulting firm.

"Employees who set their own goals are encouraged to behave like entrepreneurs. They operate with proactive, curious, inventive, problem-solving mindsets," says Ginac. "When employees are empowered to take initiative and choose their own goals, they instinctively want to transform their goals into successful outcomes."

With employees setting their own objectives feeling a greater sense of accountability and motivation to hit these marks, the benefits are fairly self-evident, as seen in the BI Worldwide study.

These self-selected employee goals, however, "must be accompanied by appropriate choice architecture," says Houlihan.

" 'Selecting your own goals' does not mean 'Select your own goal from the universe of any potential outcome,'" he continues.

In other words, the organization and HR must set parameters, helping workers identify goals that are fair and reachable, and help provide employees a framework in which to achieve them.

For example, he says, employees in the BI Worldwide study were offered three goal levels, each of which was incremental to the individual's baseline performance. Employees selecting their goals were then asked to make a commitment to a goal level of their choice.

The targets, says Houlihan, "were for one month's worth of sales activity. This timeframe allowed employees to feel they had a reasonable amount of control over the achievement of their goal.

"This aspect of perceived control is critical," he adds. "Goals that are perceived as not being under our power to influence cannot be committed to."

Indeed, "HR has a role to play in helping ensure that employees understand how to set smart goals," says Bob Rogers, president of Pittsburgh-based Development Dimensions International.

"HR helps the employee understand the process of creating a performance plan that is going to be acceptable to their managers," adds Rogers, noting that "it is the manager's responsibility to help the employee reach those goals."

At least some goals should also require employees – especially higher-performing employees – to stretch beyond their current skill, experience and knowledge levels to reach them, adds Ginac.

"When this is the case," she says, "HR must play a hand in helping the manager and employee identify gaps and provide relevant learning resources in those areas, so that gaps don't negatively impact goal attainment."

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Employee goals should also support organizational goals, says Rogers.

"Setting your own goals is the right way to go, given that each individual is pointed in the right direction," he says.

At DDI, for instance, employees determine their own goals only after the strategic goals of their managers and the strategic direction of the company are outlined for them, says Rogers.

"Together, they [complete] the employee's performance plan, which involves the employee crafting their goals," he says. "Based on the information they previously received, the employee can craft goals that support accomplishing organizational goals."

From an organizational standpoint, there are ultimately three key considerations in adopting an individual-goal setting approach, says Houlihan.

First, he says, leadership must define the functional areas – tasks, roles, jobs – and metrics appropriate for individually selected goals. Secondly, leadership – including the CHRO – must set the aforementioned parameters for employee goals, and finally, measure and report activity to relevant stakeholders, he says, using "simple game mechanics such as feedback and leaderboards for groups … to keep track of progress and keep the individuals who set the goals informed.

"It does us no good to set a goal to run a marathon," says Houlihan, "and not check our progress against some pre-established milestones."

Done right, allowing employees to select their own performance targets can indeed boost employee performance and help HR solve a longstanding problem, says Ginac.

"HR leaders and managers have struggled for decades to make people more accountable," she says.

"It's not that managers and HR leaders lack the skills or desire to make their employees more accountable. The problem is that accountability can't be mandated by anyone. Accountability is an innate feeling that comes from within employees. The employee-directed goal management process places a greater responsibility and accountability on the employee to achieve goals."

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