CFOs: This is How You Help Staff Set Goals Especially During Tough Times

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Business leaders and senior management executives such as CFOs might want to set small incremental goals for their staffers rather than a status quo one especially when expecting a tough time ahead.

Here’s why, according to Amitava Chattopadhyay, professor of Marketing and the GlaxoSmithKline chaired professor of Corporate Innovation at INSEAD.

When evaluating goal difficulty, the human brain first considers the gap between the starting point and the desired state, said Chattopadhyay.

“If there is no gap to speak of, as in the case of a status quo goal, the brain starts scanning the context, anticipating potential reasons for failure,” he noted.

“For example, if your goal is to keep the same weight this year, you may start considering the odds of you regularly eating out due to a high workload, the number of your upcoming business trips, the fact that a new donut shop has opened in your neighborhood, etc,” he added.

People by default are negative

“Our assessment of context is peculiar in the sense that it’s greatly impacted by a negativity bias,” Antonios Stamatogiannakis, Assistant Professor of Marketing at IE Business School pointed out. “Our brain has evolved over the millennia to be more sensitive to bad news than good news. Most of us instinctively give more weight to potential reasons for failure than reasons for success.

When a status quo goal is directly compared to one that involves a modest improvement, objectivity prevails: The absence of a gap makes the status quo goal seems easier, as logic would dictate, he said.

Nevertheless, in a direct comparison scenario, still preferred to pursue a small incremental goal over a “maintenance” goal, as they expected this achievement to be more satisfying, said Stamatogiannakis who referred to a study jointly conducted by INSEAD, IE Business School and Pamplin College of Business.

These results are described in, a paper co-authored by. Their paper was published in the November 2018 issue of Organizational Behavior and Human Decision Processes.

A two-step process                       

The three authors—Chattopadhyay, Stamatogiannakis and Dipankar Chakravarti, professor of Marketing at Pamplin College of Business—pointed out in their paper “Attainment versus Maintenance Goals: Perceived Difficulty and Impact on Goal Choice” based on the study that the brain assesses goal difficulty using a two-step process.

The first step is bridging the size of the gap.

If that gap is zero, the brain defaults to the second step, which is the context in which the goal is to be achieved, according to authors.

Context assessment usually triggers negativity bias, which is why, when judged in isolation, a maintenance goal is deemed more difficult than one involving a small increment, they said.

In the first studies, participants were split into groups that each evaluated the difficulty of a particular goal type, according to the paper.

While the difficulty of the goal was generally correlated to the gap size, goals that involved a modest increment were rated as easier than those involving the status quo, which was rated separately, the paper indicates.

When asked to explain their ratings, participants evaluating status quo goals were quick to mention all the obstacles that could crop up, the authors said.

In later studies, participants were more interested in pursuing a modest-attainment goal than to maintain the status quo, even when real money was in play, they added.

Implications for setting goals with your staffers

Managers setting goals such as sales quotas should be aware that status quo goals are less attractive than ones involving a slight increment, the authors said.

“This may be especially true if the economy is in a downturn, as a status quo goal will precisely draw the staff’s attention to the negative context and have a demoralizing effect,” Chattopadhyay advised.

CFOs and business leaders might benefit from taking heed to such advice from now on as the global economy is expected to grow slower. Organizations such the IMF has revised its global economic growth forecast for 2018-19 down to 3.7% from the previous 3.9%, CFOs citing risks from trade war escalation.