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  • Spring 2014 Team 1 - Goal Setting Theory Case Study
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Goal setting theory is one the most researched, dependable, and used motivational based theories. Developed in 1968 by Edwin Locke, the theory focuses on how individuals apply their efforts and attention to a given task (Locke, 1968; Locke & Latham, 2002). Goal setting theory sheds light on the value of implementing tactics that help improve individual, group, and organizational performance.  Goal setting theory has been explored so much that the do’s and what not to do’s are very clear.  Within goal setting theory, if certain measures are not followed, the result will end in failure and lead to decreased motivation instead of goal realization. Adhering to the steps in goal setting theory can help to prevent this as long as basic steps are followed. Goal setting theory will be evaluated with the following case study.

Case Study

ABC Company was having a difficult time reaching their sales goals. They had decreased their sales production month over month for the last quarter and all of the employees knew the importance of sales goals  companywide. Upper management did not provide a clear path on how to obtain sales goals, therefore one specific branch decided on setting their own goal.  Their goal would be to improve sales in their location by 20% over the previous quarter's results. It was an accepted practice by the organization that goals were to be set based on quarterly sales numbers. Managers of the sales department sat down with employees individually to set goals. The managers communicated that they would have to conduct feedback with the employees on a weekly basis to see if goals were being attained.   

Analysis of Case Issues 

Identifying an area that needs improvement was the first initiative that the organization took in making sales improvements. The assigned goal of increasing sales by 20% within a certain time frame is a broad task. It’s important that goals be specific and concise so that individuals are more motivated to achieve the set goal. Specificity was addressed when the managers met with individual employees in a cooperated effort defined as participation. “…It has been suggested that participation might be an important goal condition in addition to commitment, specificity, difficulty, and feedback.” (PSU WC, L 6, p. 7) The employees established a daily goal with their manager, making the larger goal more attainable. One aspect for managers to consider was how to get the employee's "buy in", that is, their reasoning for wanting to achieve the goal. Since sales were down across the company, the drive behind this was that if sales continued to stay at current levels or even decrease, layoffs were possible as the company would not need as many sales people. This could also lead to the closing of some branch locations. Although sales people are typically rewarded on a commission basis, a company in this state knows that the primary motivation for increasing sales was job retention and preservation of the company as a whole.

It was noted that the employees would receive feedback from their manager on a weekly basis. This will allow employee to assess whether each employee has met their daily goal. It is important to note that weekly feedback could also allow for an opportunity for employees to decide to rev or reduce their motivation and efforts. Weekly feedback serves a dual role in this case, by allowing management to keep a very close eye on exactly what tasks their employees are accomplishing while seeing if sales figures are rising by the determined amount. This relates to the core concepts of the goal setting theory regarding energy and task persistence (PSW WC, 2014, L.6, p. 3). Energetic work, while a basic focus for most organizations, in this case needs to be turned towards achievement of the goal. It is important to maintain daily operations here as well, since other aspects of the business like customer service and product quality could suffer, so this needs to be part of management considerations when establishing the goal. In addition, weekly feedback shows the seriousness of the issue since it is obvious that the managers are keeping a very close eye on progress of each of their employees. This serves to maintain task persistence, since each of the employees realizes that their work is being thoroughly examined and compared to each of their co-workers in efforts to reach the goals set.


Application of Goal-Setting Theory 


Since the primary aspect to be discussed is driving motivation, they initial key to setting goals is that the employees and organization must accept them as both valid and attainable. In addition, there must be some sort of motivation for the employees to accept that these goals are both important to the organization and to themselves individually. Knowing that feedback is important and will be assessed is important to the individuals since they know that their job is linked to their performance, but occasionally, there may need to be other consequences as well. In this style, a company could link commitment to the goal to some kind of reinforcement or punishment structure, either positive or negative, based on an employee's adherence to the goal. Positive reinforcement could include bonuses or extra time off as a reward for meeting aspects or the totality of the goal and negative punishment could include reprimands or even termination for poor performers (PSU WC, 2014, L. 3, p.4-5). In this way, there is a link established between accepting the goal and some kind of structure behind it to be determined after the time frame is up.


In order for sales people to see accomplishment, the goals they set must be specific.  That being said, goals such as “sell more” or “try harder’ are not likely to lead to concrete results.    On top of that, there is nothing to base results off of if the goal is to “try harder”.  Because of this specific goals should be established for each sales person.  “Call 4 potential clients before lunch” and “Call 6 established clients for renewals after lunch” are goals which are more specific.  “Goals are more motivating if they specify what needs to be done, how much needs to be done, and when it needs to be done” (PSUWC, 2014, L. 6. p. 4).   Specificity is not the only thing a goal needs, but it is an important part since employees need to know exactly what objectives are trying to be achieved, both for the company and their own individual performance. Simply stating that sales numbers need to rise would not be good enough since the company desires a 20% increase and any rise above the employee's current levels of performance would technically achieve the less specific goal. 


Goal difficulty is an important aspect of goal creation.  The difficulty of the goal is an effective motivation tactic.  Goal difficulty should be high enough to motivate and encourage high performance, but low enough to still be attainable.  It should also not be set so low that production is lowered (PSU WC, 2014, L6. p. 4).   In the case of ABC Company, goal difficulty should be set to be higher than current sales numbers, but not so high to de-motivate employees in attaining an unreachable goal.  The organization has set this amount to 20%.  Individually, employees can set personal goals to help achieve this goal.


Goals also need to be set to a level that is both desirable for the company and attainable by the individual. Goals that are set too low will not meet company needs and employees will not have a difficulty reaching them. In this case, the company suffers because if the goals are set too low, then the company will fail because numbers are not being met. If the goals are set too high, then they set up their employees to fail since the numbers are not realistically attainable by people. Perhaps a few may meet the sales numbers, but for the most part people will not meet them, thus impacting not only goal commitment but also the morale overall will be lowered because people feel that nothing they will do will meet the excessive goals. In this case, it is alright to set regular goals to be met, then "stretch goals" on top of those that only the highest of performers will meet.


Feedback provides employees with the information regarding how well they are performing against their goals. Feedback keeps the employees on a path to meet their specific goals. Feedback must be informative and specific in order to properly motivate employees with respect to Goal Setting Theory. Examine the difference in the following statements by a leader to one of their employees. "Your performance this week is better than last, you should be able to meet your goal." or " Your performance has increased by 5% week over week. The additional question (how prepared are you for an emergency?) in your sales technique is giving you more information to help sell our products to the customer and it shows." The current debate on feedback in research is between outcome and  process feedback. Outcome feedback indicates that a  change is needed, but process feedback tells the employee what needs to be changed and how to change it.

One of the most common forms of feedback used in organization is 360-degree feedback. 360-degree feedback is an evaluation method that incorporates feedback from the worker, his/her peers, superiors, subordinates, and customers. Results of these confidential surveys are tabulated and shared with the worker, usually by a manager.

Interpretation of the results, trends and themes are discussed as part of the feedback. The primary reason to use this full circle of confidential reviews is to provide the worker with information about his/her performance from multiple perspectives. From this feedback, the worker is able to set goals for self-development which will advance their career and benefit the organization. With 360-degree feedback, the worker is central to the evaluation process and the ultimate goal is to improve individual     performance within the organization (Linman 2004).

Pros of 360 degree feedbackCons of 360 degree feedback
Fosters individual growthFeedback is tied to pay or merit increase
Feedback is an opportunity for improvementPossible resentment among co-workers
Feedback is confidentialExcessive amounts of surveys required
Employees learn appropriate methods to provide feedback 
Support feedback with customized coaching 

Limitations of Goal Setting Theory


While goal setting theory may be one of the most widely accepted theories is I/O psychology, it is not without it's limitations. One of the most common is that structure of goal settings and MBO programs. For example, if employees become too focused on one specific goal, they may lose sight of other important performance areas that they need to meet. Also, conflicting goals prevent employees from obtaining both goals.

Vic Johnson on reasons why goals fail. (Johnson, Motivation Goal Setting).

Another valid limitation in the goal setting theory among researchers is the should employees be provided with learning goals versus performance goals. Many agree that the primary difference between learning and performance goals is where the particular goal focuses the employees attention.The focus of a learning goal is to increase one's knowledge (ability); the focus of a performance goal is to increase one's motivation to implement the knowledge. Therefore, goal setting theory should focus on both performance and learning goals to be a more effective solution to employee motivation (Seijts & Latham 2013).

Discussion and Summary


The challenge of motivation in the ABC Company is a commonality shared with various companies with goals and precisely how companies deal with this conundrum. For ABC’s solution of motivational success, it is determined that managers have to direct attention, energize their base, create an environment where task persistence is amicable, and finally use effective strategies. Direct attention is behavior that will accomplish the goal and moving away from the behaviors that will not achieve the goal (Redmond& Alexander, 2014).  Analysis shows that managers conducted feedback to direct the attention of their subordinates on goal attainment. Energize is defined as inspiration to put out a certain amount of effort based upon the difficulty of achieving one's goal (Redmond & Alexander, 2014).  The analysis determined that for the managers to energize the sales team the company would have to be forthcoming in its insufficiencies. The managers determined that commission was not equitable enough to motivate their sales team. Honesty about the condition of the company and the threat of job loss reality was used to energize the sales team. Task persistence is the amount of time spent on the behavior to achieve a goal. Each employee was given a week before their progress was reviewed (Redmond& Alexander, 2014). This weekly basis ensures two things; (1) the sales associate is aware of their rate of sales and (2) sales associate has a target to beat. Finally, effective strategies is a person wanting to achieve a goal which then the wanting to achieve a goal the individual seeks out different ways to achieve it (Redmond& Alexander, 2014). Each sales associate will have to try different techniques that will help him or her achieve their sales goals. The analysis states that the sales team members will sit down and discuss individually their processes for goal achievement. The MBO technique is used along with the process of SMART (Maneotis, 2013). MBO is an approach used to systematically align both employees' goals and the goals of the organization and ensures that everyone is clear about what they are doing and why it is beneficial to the organization (Mindtools, 2012; as cited by Redmond & Alexander 2014). The management by objectives has a five-step process:

1. Set or Review Organizational Objectives - This step requires defining the clear organizational objectives. 

2. Cascading Objectives Down to Employees - Once the objectives are set they need to be clear to every employee. To make sure that the goals are attainable and the employees feel accountable, the SMART method will be used. 

3. Encourage Participation in Goal Setting - Everyone needs to understand how personal goals fit within the objectives of the organization and allow sharing and discussion so that everyone understand "why" things are being done. This allows everyone to set goals to align with the organizational goals and also allows for an increase for personal responsibility of their objectives. Self-direction, decision making, and responsibility is an important part of this step and encourages motivation within the employees.

4. Monitor Progress - Since the goals and objectives of SMART are measurable, they can be monitored. However, those are monitoring need to make sure that they are timely with their monitoring in case something is wrong so issues can be adequately dealt with in a timely manner. Make sure every goal has mini goals, and adequately monitor goal performance and accountability. 

5. Evaluate and Reward Performance - The MBO is designed specifically to improve performance at all levels of the organization. Employees are evaluated on their performance related to the goal, and retrospectively include rewards such as compensation and provide appropriate feedback. "When you present organization-wide results you have another opportunity to link individual groups' performances to corporate performance. Ultimately this is what MBO is all about and why, when done right, it can spur organization-wide performance and productivity" (Mindtools, 2012; as cited by Redmond & Alexander 2014).

            The MBO is a tool that allows ABC to improve their sales and unify the efforts of the employee and the company. The basis technique relies SMART or (specific, measureable, assignable, realistic, and time based) (Locke & Latham, 2002 as cited by Maneotis, 2013).


Johnson, V. [Vic Johnson]. (2010, Jun 16).  Motivation Goal Setting. [Video File].  Retrieved from

Linman, T. (2004).  360 Degree Feedback: Weighing the Pros and Cons. Retrieved from 

Locke, E. A. (1968). Toward a theory of task motivation and incentive. Organizational Behavior and Human Performance, 3, 157-189.

Locke, E. A., & Latham, G. P. (2002). Building a practically useful theory of goal setting and task motivation: A 35-year odyssey. American Psychologist, 57(9), 705-717.

Pennsylvania State University World Campus. (2014).  PSYCH 484.  Lesson 3: Reinforcement Theory:  What are the Rewards for My Work? Retrieved on February 23, 2014 from

Pennsylvania State University World Campus. (2014).  PSYCH 484.  Lesson 6: Goal-Setting Theory: What am I trying to achieve in my work? Retrieved on February 22, 2014        from

Redmond , B., & Alexander, P. (Feb., 2014 21). Goal setting theory . Retrieved from Goal Setting Theory

Seijts, G. H., & Latham, G. P. (2013). Learning Goals or Performance Goals: Is it the Journey or the Destination? In W. G. Rowe, & L. Guerrero, Cases in Leadership (pp. 193-200). Los Angeles: Sage Publications.


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