Effective goal setting is key to running a successful business. It's also an inherently tricky endeavour from a psychological standpoint — especially if your organisation is facing financial headwinds.
Ideally, you're able to set — and meet — ambitious targets. But what about in an organisation where the coming year is uncertain and repeating last year's results might be a cause for celebration? Should you just maintain the status quo when setting goals? A recent study argues that setting modest goals is actually easier than holding steady.
Owing to a quirk in the way our brains perceive goals, the study concluded that people find it easier to achieve a small incremental goal than to maintain the status quo, when both goals are assessed separately. The study was conducted by marketing professors from INSEAD, a global graduate business school; IE Business School in Spain; and Virginia Tech's business school in the US.
The paper found that when evaluating the difficulty of a goal, our brains go through a two-step process. First, we consider the difference between our current state and the desired state. The bigger the gap, the more difficult the goal.
Take, for example, the goal to increase savings. Setting aside $100 a month compared to $10 a month will be considered more difficult because the discrepancy is larger.
Second, after evaluating the gap between our current state and desired state, we assess the context to see if the goal is achievable. For example, we might calculate our annual household income and monthly expenses and consider the extra expenses needed for gifts and travel.
However, when we are told to maintain a goal where the gap is zero, say setting aside $100 a month for the whole of 2019 after doing the same in 2018, our brains go straight to the second step to assess the context. Researchers found that in maintenance goals, more of participants' thoughts are related to the goal's context — and the thoughts are mostly unfavourable.
Using the same example of saving money, we might start thinking what might prevent us from saving the same $100 every month in 2019, whether it's due to an upcoming wedding we must travel to, a child's big birthday party, or an anticipated financial need in the family, reflecting a tendency to focus on negative outcomes. This causes us to perceive maintenance goals as difficult.
"What happens is that [when] the mind doesn't have the difference to grab on to, it starts looking at context to see what could go wrong," said Amitava Chattopadhyay, co-author of the paper and professor of marketing at INSEAD's Asia campus in Singapore. "It's the way the mind processes goals. When you have a difference between the current state and future state, your mind focuses on that difference; in its absence it shifts to what could potentially go wrong."
This finding contradicts the commonly held belief that no change is easier than any change. "Logic dictates ... when that difference is zero ... it should be the easiest. What we hypothesised and empirically show is that isn't the case," Chattopadhyay said.
Chattopadhyay said that when the gap between our current state and our desired state is small, people tend to consider it an easy goal. "Every time we encounter something [easy] we don't spend too much time thinking about it. We say, 'Yes, [I] can do that,' then we move on."
This may explain why even though a modest goal is objectively more difficult, people nevertheless perceived it as being easier than a maintenance goal. This finding can have wide-ranging implications for personal goal setting, a manager setting team targets, and marketing efforts to encourage desired consumer behaviours. And it is especially useful during times where even a slight step forward in last year's goal seems unattainable, or in times of economic uncertainty.
Alexis See Tho is an FM magazine associate editor. To comment on this article or to suggest an idea for another article, contact her at Alexis.SeeTho@aicpa-cima.com.