Do aggressive goals drive unethical behavior?

Research on goal setting and pay for performance can inspire not only higher performance, but higher malfeasance. And thinking “outside of the box” can cause trouble when misapplied. Even the smallest moral transgressions can evolve into problems of significant size.

A $200,000 annual sales goal. $1 million in retirement savings. A 4.0 GPA. In today’s society, most of us are familiar with goals set by employers, institutions and individuals seeking to do more and be better. In fact, every New Year’s Eve encourages a goal-setting mindset of resolutions to avoid past failure and achieve desired objectives in the coming year.

But striving for a goal is not always beneficial, from an ethical perspective. In some cases, the “what” — the result achieved — can take precedence over the “how” — the way a goal is achieved. In his paper titled “Immoral Goals: How Goal Setting May Lead to Unethical Behavior,” Assistant Professor of Management David Welsh and Lisa Ordonez of the University of Arizona reviewed 50 years of research showing that setting goals may have unintended negative results.

The findings indicate that while many companies and institutions use goals as motivators to focus energy on a desired outcome, the presence of goals actually increases the likelihood of unethical behavior. When a person focuses attention on a goal, their moral awareness is decreased — that is, they may be more “morally disengaged” or less focused on making moral choices while pursuing a goal. To get what they’re going for they may choose risky, even immoral activities like lying, cheating or stealing, which they wouldn’t otherwise do.

Welsh cites a study by Michael Jensen in which “Managers close to attaining the target may go to great lengths to achieve it, often turning questionable tactics such as realizing sales revenue earnings or hiding expenses, and are rewarded for doing so, even though the company as a whole may be worse off.”

A well-publicized example of this is the 2014 Veterans Health Administration scandal, in which leaders responded to an aggressive wait list goal by creating a fake wait list that lived up to that expectation, never mind that it wasn’t actually real.

Although a difficult performance goal can be highly motivating, the pursuit of this goal often leads employees to feel drained and to have greater difficulty exerting self-control. Welsh and Ordonez tested for the impact of a difficult goal in a 2014 study titled “The Dark Side of Consecutive High Performance Goals: Linking Goal-setting, Depletion, and Unethical Behavior” published in Organizational Behavior and Human Decision Processes. The experiment showed that although goals initially increased motivation and effort, over time this additional pressure actually wore people down and made them more likely to behave unethically.

“Are you driving bad behavior?” asks Welsh. “Companies should open the conversation about motivation, recognizing that paying people for meeting specific goals is truly a double-edged sword. There is a potential downside that should be further considered in light of the existing research.”

Creativity’s darker side

Thinking outside the box is generally applauded in the business world. Creativity is often viewed as an almost magic trait that can drive competitive advantage and profitability. Apple extolled the innovation mindset in its “Apple: Think Different” campaign. Other examples include the “3M: Innovation,” and “GE:  Imagination at Work” branding efforts.

But there may be a darker side to the bright virtue of creativity. In a 2015 study called “The Gray Side of Creativity: Exploring the Role of Activation in the Link between Creative Personality and Unethical Behavior” published in the Journal of Experimental Social Psychology, Welsh and colleagues have found a link between creativity and unethical behavior.

After completing the creative exercise (using Lego blocks to design a new product concept), students were asked to take a test, self-score and then report their own results. In contrast to a group of students who were not “activated” or stimulated by the Lego design exercise, the students who had used creativity prior to the test tended to inaccurately or dishonestly over-report their performance. On the other hand, the students who had performed a boring, rote, mechanical task had fewer incidences of misreporting their performance.

Does this mean that creativity makes us liars? Not quite. Creative individuals have the ability to engage in cognitive flexibility and divergent thinking. This can be a wonderful asset when applied in positive ways such as creating new products for customers or generating ideas that advance the business. But the same cognitive flexibility may also be used to ignore rules and justify questionable conduct. Consider how in 2008 Lehman Brothers Holdings Inc. disguised over $50 billion in loans as sales, leading to the largest bankruptcy in U.S. history.

“Where does one draw the boundary line?” says Welsh. “Thinking of new ways to serve customers is great, but thinking creatively about getting around the rules of accounting is not.”

As a solution, Welsh emphasizes the need to use creativity within context — brainstorming when it is appropriate and avoiding a mindset of moral justification.

“If you get into a creative mindset in which you begin to justify the means for an immoral activity or compliance on the back-end, then you’ve gone too far,” he says.

Even small infractions can snowball

Another unrecognized risk to ethical behavior is the tendency for even the smallest unethical action to swell into much larger proportions over time due to the “slippery slope” effect.

In a 2014 study published in the Journal of Applied Psychology titled “The Slippery Slope: How Small Ethical Transgressions Pave the Way for Larger Future Transgressions,” Welsh and colleagues have demonstrated the existence of this oft mentioned slope.

“The slippery slope that we felt intuitively to exist is, indeed, quite real,” he says. “The evidence suggests that small transgressions do lead to larger ones over time.”

A prime example is Bernard Madoff, who ended up stealing a total of $18 billion from clients in perhaps the largest Ponzi scheme in history. When asked how this happened, he said: “Well, you know what happens is, it starts out with you taking a little bit, maybe a few hundred, a few thousand. You get comfortable with that, and before you know it, it snowballs into something big.”

How does this happen? According to Welsh, unethical behavior actually produces changes in how a person regulates their thoughts and actions, so that you can become more and more out of touch with your own moral compass through a series of gradually changing ethical choices. It may start with employees gradually misreporting hours worked, exaggerating aspects of job performance over time or overstating the positives of a product. These acts of dishonesty might seem fairly harmless, but if left unchecked, small indiscretions may grow into major violations.

To stop the gradual slide down the slippery slope, organizations should focus on maintaining moral engagement. “Inducing a prevention focus of ethical vigilance will work,” says Welsh, “Even when temptation starts to emerge and unethical justifications are readily available.”

Upholding a code of ethics and setting the tone from the top is a first step, but it must be enforced, according to Welsh. “A code of ethics by itself has no impact,” he says. “When constantly enforced, it does have an impact. Culture makes it mean something.”

Avoiding common ethical pitfalls: A change of culture is needed

In light of this research, it may be time to rethink some common practices currently widespread in business. For example, goal-setting may motivate employees to perform, but it may also motivate them to achieve the goal through whatever means necessary. Research has shown that difficult goals must be used with caution as there are likely to be unintended consequences that result.

Creativity, too, should be reconsidered in terms of the context. Managers and individuals need to develop greater awareness of the dark side of creativity, which can be used to justify unethical behavior such as finding legal loopholes, hiding accounting truths or avoiding compliance violations. Companies also must understand that employees who are left unchecked may descend the ethical slippery slope.

In the end, staying on the right ethical path is all about mindset, says Welsh.

“We need to cultivate a mindset of vigilance for people to be less likely to make decisions that will take them down the slippery slope,” he says. “Most people are neither saints nor criminals, but somewhere in between. If you put people in the wrong context with the wrong leaders and the wrong goals, they can get caught up in it.”

The bottom line:

To avoid ethical pitfalls:

  • Maintain and cultivate a prevention-focused mindset and business culture.
  • Encourage ethical behavior, such as asking employees to be vigilant in identifying financial mistakes rather than being creative in trying to find financial loopholes.
  • Establish and, most importantly, enforce a code of ethics.
  • Address questionable employee conduct to reduce escalation of issues over time.
  • Demonstrate ethical behavior as a leader by setting the tone from the top.
  • Consider the negative ethical, emotional and performance-related effects of goal setting.
  • Watch for unintended consequences associated with goal-oriented reward systems and pay for performance programs.
  • Remember that even the smallest ethical transgression, if left unchecked, may snowball into larger problems over time, leading one down the unforgiving slippery slope.