Goal setting theory of performance management system

By Indra Giri & Pamkhuila Shaiza on September 29, 2016

Goal setting refers to goals being set for the future for subsequent performance of an individual or organisations. The pioneer of goal setting theory Edwin Locke states that when individuals or organisations set more difficult goals, then they perform better. On the other hand, if the set goals are easy then the performance of an individual or organisation decreases (Locke & Latham 2006). This theory by Locke was developed inductively after studying the psychology of organisations and industries over the years. It is based on 400 laboratory and diverse field studies. When a person or organisation is committed to achieving goals and do not suffer from any conflicting goals. Then, the achievement of the goal is positive.

“Goals refer to future valued outcomes, the setting of goals is first and foremost a discrepancy-creating process” (Locke & Latham 2006: 265).

In addition goal setting will help in developing an action plan designed to guide people and organisations. Consequently, this helps in making it a major component of personal development and management literature. Furthermore, many researchers point out that there is a positive correlation between goal setting and improved business and organisational results. This is because goal setting theory encompasses all aspects of building organisations with efficiency (Locke & Latham 2006; Spaulding & Simon 1994; Koppes 2014).

Properties of goal setting theory

According to Locke, there are five basic principles that allow goal setting to perform better. These include clarity, challenge, commitment, feedback, and task complexity (Locke & Latham 2006).

  1. Clarity refers to a clear and measurable goal that can be achieved within a specific timeline and within goal setting.
  2. Challenge refers to the goals being able to achieve a decent level of difficulty, motivating the individual and organisation to strive for positive goal achievements.
Properties of goal setting theory
Properties of goal setting theory
  1. Commitment makes individuals or organisations put on deliberate efforts in meeting goals. Furthermore, it also helps goals to become more achievable.
  2. Feedback provides information on the progress towards achieving goals. Individuals and organisations can adjust goal setting according to the feedbacks.
  3. Task complexity makes the achieving of goals easier by laying down process and steps. Goal setting can be achieved by applying all the principle stringently and ensuring that all goals account for the principles.

Used at both individual and organisational leve

Goal setting is often used by individuals for their personal goals and in groups at workplaces and social gatherings. Goal setting can be applied in all place where effective results are desired through effective goal setting (Locke & Latham 2013).

Hence, in order to apply goal setting in a day to day work, a ‘commitment analysis’ should be undertaken to draw up objectives and goals. It allows continuous improvement in objectives and performance standards (Moynihan 2008). Commitment analysis helps in determining the continuous pursuance of objectives and goals set to improve productivity (Krausert 2009).

Advantages of goal setting theory

Taking various analysts (Spaulding & Simon 1994; Donovan & Williams 2003; Wosnitza et al. 2009) on goal setting into perspective, the steps towards achieving goals include:

  1. Choice helps to narrow down the goals and directs goal efforts to more relevant activities. Various factors such as self-efficacy, past performance and social influences affect the choice of goals. Therefore, it is important to consider goal choice.

For example, while taking track and field athletes and their goal choice into perspective Donovan & Williams (2003) assert that athletes usually set two goals choice for present and past seasons. Thereby articulating self-efficacy, past performance and social influence into studies. This gives the opportunity to do away with negative components and performance discrepancies.

  1. Efforts make goals to be achieved with more intensity and positive working. Efforts allow goal commitment to be expected to impact performance directly and indirectly. Also, efforts are detrimental in affecting personal goals and self-efficacy for individuals combined (Wosnitza et al. 2009).
  2. Persistence allows becoming more intense in pursuing goals and improving performance. Persistence includes efforts expended over the process of achieving goals. Individuals who are persistent often see obstacles in their goals as a challenge.

    “Setting a challenging performance goal and appropriate corporate performance metric is important” (KINICKI 1995: 187).

  3. Cognition helps to develop and change behaviour to achieve goals. In an effective goal setting method, an intrinsic motivation towards goal attainment is important. High achieving goals are seen as being intrinsically and cognitively inclined (Spaulding & Simon 1994). Lock and Latham recognised the fundamental significance of cognition in goal setting. Furthermore, it helps to achieve task-specific goals and situational goals more progressively. Research done on cognition specific goal setting element concluded that every cognitive task situation poses a set of requirements for those who seek to successfully complete the task (Locke & Latham 2013: 249).

Limitation of goal setting theory and its validity in a business

Goal setting has often been brought out as being time-consuming and expensive in an application (Mobley 1999; Julnes et al. 2007). This is because there are various factors needs to be addressed to achieve the goals by businesses. This includes:

  • Selections of right people with skills and knowledge.
  • Making training for career development and organisational productivity a necessity.
  • Involving time and incurring expenses.

Furthermore, it also brings in internal competition risk, where employees often compete with each other. In such a  scenario the interest and objectives of the business are to ignore and focus on individual achievements. Favouritism by leaders of those individuals who perform better also become a limitation of the goal-setting theory (Mobley 1999; Julnes et al. 2007). Goal setting is applicable and more importantly, many organisations prefer it over other management tools.


  • Donovan, J.J. & Williams, K.J., 2003. Missing the mark: effects of time and causal attributions on goal revision in response to goal-performance discrepancies. The Journal of applied psychology, 88(3), pp.379–90.
  • Dooren, W. Van, Bouckaert, G. & Halligan, J., 2010. Performance Management in the Public Sector, London: Routledge.
  • Julnes, P. de L. et al., 2007. International Handbook of Practice-Based Performance Management, London: SAGE Publications.
  • KINICKI, 1995. Organizational Behavior, London: Tata McGraw-Hill Education.
  • Koppes, L.L., 2014. Historical Perspectives in Industrial and Organizational Psychology., New York: Taylor and Francis.
  • Krausert, A., 2009. Performance Management for Different Employee Groups: A Contribution to Employment Systems Theory, New York: Springer Science & Business Media.
  • Locke, E.A. & Latham, G.P., 2013. New Developments in Goal Setting and Task Performance, New York: Routledge.
  • Locke, E.A. & Latham, G.P., 2006. New Directions in Goal-Setting Theory. Current Directions in Psychological Science, 15(5), pp.265–268. Available at: http://cdp.sagepub.com/lookup/doi/10.1111/j.1467-8721.2006.00449.x [Accessed September 19, 2016].
  • Mobley, R.K., 1999. Total plant performance management: A profit-building plan to promote, implement, and maintain optimum performance throughout your plant, Gulf Pub. Co.
  • Moynihan, D.P., 2008. The Dynamics of Performance Management: Constructing Information and Reform, Georgetown: Georgetown University Press.
  • Rausch, P., Sheta, A.F. & Ayesh, A., 2013. Business Intelligence and Performance Management: Theory, Systems and Industrial Applications, New York: Springer Science & Business Media.
  • Spaulding, W.D. & Simon, H.A., 1994. Integrative Views of Motivation, Cognition, and Emotion, Nebraska: Nebraska Press.
  • Wosnitza, M. et al., 2009. Contemporary Motivation Research: From Global to Local Perspectives, Massachusetts: Hogrefe Publishing.


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