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On Establishing Legitimate Goals and Their Performance Impact

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Abstract

We investigate the role of legitimacy in setting organizational goals as a way to address the potential “dark,” unethical side of organizational goal setting. Coupling qualitative and quantitative research methods to better understand legitimacy in goal setting, we first induce novel hypotheses based on observed practice and then provide survey evidence to test the performance implications. Study 1 reports findings based on interviews with twenty-two company executives. We identify attention to goal credibility, prioritization of stakeholders directly involved in the goal’s attainment when setting goals, and communication openness regarding goals, as well as their combination, as being important to organizational performance outcomes. Study 2 determines whether these three practices and their interaction predict performance using a survey conducted with 522 companies across four countries. Among other findings, we contribute to the organizational goal setting literature by showing that higher organizational performance is associated with the amount of priority given to the key actors (typically employees) directly involved with the goal’s attainment. We also find a positive interaction between attention to goal credibility, key actor (employee) importance, and communication openness on financial performance and non-financial goal attainment. Our work takes an initial step toward understanding how organizations can better shape the legitimacy of organizational goals for improved organizational performance and reduced unethical behavior.

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Notes

  1. We note that the study by Ordóñez et al. (2009) is based on anecdotal evidence from public press sources rather than systematic research.

  2. The small sample size of the secondary data precluded testing our full model against for revenue change as a criterion variable due to inadequate statistical power (Cohen 1992).

  3. While there is a large literature on communication, practical ways of improving communication style can be obtained from the work of Cialdini (2009) and Sundie et al. (2012) who focus on social influence techniques to enhance motivation.

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Acknowledgements

We thank Editor R. Edward Freeman and two anonymous reviewers for their helpful comments and guidance.

Funding

The first-named author’s contribution to this work was funded through the support of the Australian Research Council (Award DE130100840).

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Authors and Affiliations

  1. UNSW Business School, UNSW – Sydney, Sydney, NSW, 2052, Australia

    George A. Shinkle, Mirjam Goudsmit & Chris J. Jackson

  2. Asia Europe Business School, Faculty of Economics and Management, East China Normal University, 155 Tanjiatang Road, Minhang District, Shanghai, 200241, China

    Feifei Yang

  3. Owen Graduate School of Management, Vanderbilt University, 401 21st Avenue South, Nashville, TN, 37203, USA

    Brian T. McCann

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  1. George A. Shinkle
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  2. Mirjam Goudsmit
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Correspondence to George A. Shinkle or Feifei Yang.

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The authors declare that they have no conflict of interest.

Ethical Approval

All procedures performed in studies involving human participants were in accordance with the ethical standards of the institutional and/or national research committee and with the 1964 Helsinki Declaration and its later amendments or comparable ethical standards.

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Informed consent was obtained from all individual participants included in the study.

Appendix: Interview Questions

Appendix: Interview Questions

Our interviews used a semi-structured interview technique. Pertinent example questions include:

  1. 1.

    How are your strategic goals and KPIs (key performance indicators) determined?

  2. 2.

    What factors (inputs) guide the choice of KPIs and strategic goals?

  3. 3.

    As the organization sets its goals, what is the level of consideration about what others may think (others can include shareholders, customers, and employees)?

  4. 4.

    What other actions does the organization take to improve goal achievement (for example, do you use any special communication processes)?

  5. 5.

    What aspects about setting goals are most important in achieving higher performance?

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Shinkle, G.A., Goudsmit, M., Jackson, C.J. et al. On Establishing Legitimate Goals and Their Performance Impact. J Bus Ethics 157, 731–751 (2019). https://doi.org/10.1007/s10551-017-3684-2

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