Chapter 7 The Path-Goal Theory of Leadership.pdf

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The Path–GoalThe Path–GoalTheory of LeadershipTheory of Leadership

You have to be able to be very tough and very supportive, if supportive is needed.And you have to give others room. But that doesn’t mean you abdicate authority,because you have been entrusted with authority if you lead something and thenyou have to exert it.

—Dan Vasella1

The path–goal theory of leadership is similar to the situational and contingencytheories of leadership in that it prescribes appropriate leadership styles for interact-ing with subordinates. It is different from the situational and contingency theories in

that path–goal theory adds more variables to what leaders need to consider in their rela-tionships with employees. In essence, the path–goal theory of leadership “is about howleaders motivate subordinates to accomplish designated goals” (Northouse, 2010).

Based on expectancy theory, path–goal theory suggests that employees will be motivatedif three conditions are met. These are the following: Employees believe in their ability to per-form their assigned work-related tasks, they believe that their work-related efforts will lead toappropriate outcomes, and they believe that these work-related outcomes will be meaningful.

The key to understanding the path–goal theory of leadership is to think about thepath that subordinates must follow to achieve goals assigned. Subordinates are motivatedby their leader to achieve these goals when leaders clearly define the goals, clarify the pathto completing the goals, remove obstacles to completing the goals, and provide supportto help achieve the assigned goals (Northouse, 2010). This is illustrated in Figure 7.1.

1Dan Vasella is the CEO and chairman of Novartis AG.

C H A P T E R

5C H A P T E R

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206 CASES IN LEADERSHIP

Path–goal theory has several components that leaders need to assess if they are tocreate a positive association between subordinate motivation and goal achievement.Different leadership behaviors will differentially affect subordinate motivation, and thisimpact will depend on subordinate and task characteristics (Northouse, 2010). These fourcomponents of path–goal theory are shown in Figure 7.2.

Subordinates Path Path

Obstacle(s)

Goal(s)(Productivity)

Path–Goal Leadership

• Defines goals

• Clarifies path

• Removes obstacles

• Provides support

SubordinatesGoal(s)

(Productivity)

Task Characteristics

Subordinate Characteristics

Motivation

Leader BehaviorsDirective

SupportiveParticipative

Achievement oriented

Figure 7.1 The Basic Idea Behind Path–Goal Theory

SOURCE: From Northouse (2010). Copyright 2010, Sage Publications, Inc. Reprinted with permission.

Figure 7.2 Major Components of Path–Goal Theory


FOR INSTRUCTOR REVIEW ONLY. NOT FOR DISTRIBUTION, SALE, OR REPRINTING. Copyright © 2011 by Sage Publications, Inc.

Chapter 7: The Path-Goal Theory of Leadership 207

Leader Behaviors

Initially, four leader behaviors were assessed but with the understanding that otherswould be examined as research continued. These were directive, supportive, participative,and achievement oriented (House & Mitchell, 1974; Yukl, 2006).

Directive Leadership

This leadership style emphasizes giving direction to subordinates regarding their tasks (Daft,2005). These directions include the result expected, how the task will be accomplished, andthe schedule for task completion. In addition, the leader clarifies performance expectationsand explicitly outlines the required standard operating procedures, rules, and regulations(Yukl, 2006). This style increases subordinate morale when there is task ambiguity (Dubrin,2007) and is similar to the task-oriented or initiating structure style (Daft, 2005).

Supportive Leadership

These leaders are approachable (i.e.,maintain an open-door policy), friendly, and empatheticto their subordinates’ needs and well-being (Yukl, 2006). They expend extra effort to ensurethe workplace has an enjoyable environment, and they create an atmosphere of honor,respect, and equality for their subordinates in the workplace. This style is most appropriatefor improving morale when tasks are boring, frustrating, repetitive, stressful, and dissatisfy-ing. Subordinates who are uncertain of their capabilities, situation, and future appreciate thisstyle more (Dubrin, 2007). In addition, this style is similar to the people-oriented or consid-eration style (Daft, 2005).

Participative Leadership

These leaders encourage employees to actively participate in the decision-making processthat determines how the group will achieve its goals. They do this through consultation,solicitation of employee suggestions, and using employee ideas in the decision-makingprocess (Daft, 2005). This style is most likely to enhance the morale of subordinates whoare well motivated and engaged in tasks that are nonrepetitive (Dubrin, 2007).

Achievement-Oriented Leadership

This leadership style challenges employees to work at a performance level that is the bestpossible. The leader sets a very high standard and continuously seeks to improve perfor-mance above that initial standard (Daft, 2005). Achievement-oriented leaders also expressa great deal of confidence in the abilities of employees to set and achieve very demandinggoals (Yukl, 2006). This style is most appropriate for improving morale when subordi-nates have a high need to achieve and are working on tasks that are characterized by vari-ety and ambiguity (Dubrin, 2007).

The path–goal theory is different from trait theory in that leaders are not constrained toa leadership style that depends on their personality. It is also different from contingency the-ory in that leaders do not have to bematched to particular situations or the situation changedto match leader style. House and Mitchell (1974) argue that leaders may be flexible (similar


to situational leadership in Chapter 5) and exercise all or any of the four styles describedabove. They suggest that it will depend on the subordinate and task characteristics. In addi-tion, leadersmay integrate styles should the situation require a blending of two ormore styles(Dubrin, 2007). In the next two sections, we describe the subordinate and task characteris-tics on which the impact of leader behavior on subordinate motivation depends.

Subordinate Characteristics

Several characteristics determine how much satisfaction (present or future) subordinateswill obtain from a leader’s behavior. Four have been studied intensely. These are “subor-dinates’ needs for affiliation, preferences for structure, desires for control, and self-perceived level of task ability” (Northouse, 2010).

Subordinates with a higher need for affiliation should prefer supportive leadershipbecause friendly, concerned leadership will give these subordinates greater satisfaction.On the other hand, subordinates who work in uncertain situations and have a tendencyto be dogmatic and authoritarian should prefer directive leadership because this type ofleadership gives “psychological structure and task clarity” (Northouse, 2010).

Whether subordinates have an internal or external locus of control determines whichleader behaviors give more satisfaction. Internal locus of control suggests that subordi-nates believe that the decisions they make affect what happens in their lives, while exter-nal locus of control suggests that subordinates believe that what happens in their lives isbeyond their control. Subordinates with an internal locus of control should find partici-pative leadership more satisfying because it gives a greater feeling of being in charge andof being an important part of the decision-making process. On the other hand, subordi-nates with an external locus of control should prefer directive leadership because it par-allels their belief that external forces control what happens to them (Northouse, 2010).

Finally, self-perceived level of task ability is important in determining how leader behav-iors affect subordinates’ satisfaction and motivation. Subordinates with a higher perceptionof their own competence at performing specific tasks should prefer less directive leaders.As subordinates assess that they are becoming more competent, directive leadership maybecome superfluous and seem more controlling than necessary (Northouse, 2010).

Task Characteristics

Task characteristics also have a major effect on how leader behaviors affect subordinates’ sat-isfaction and motivation. These characteristics include the subordinates’ task design, theorganization’s formal authority system, and subordinates’ primary work group (Northouse,2010). For example, when there is task clarity and structure, well-established norms and cus-toms, and a clear formal authority system, subordinates will not need leaders to provide goalclarity or coaching in how to achieve these goals. Subordinates will consider that their workis of value and that they can accomplish their tasks. Leaders in this situation may be viewedas more controlling than necessary, having little or no empathy and, therefore, unnecessary.

Other situations may need leaders to be more involved. In a context where there isgoal ambiguity, leaders can provide structure. Repetitive tasks may require supportiveleadership given the mechanical nature of these tasks.When there is a weak authority sys-tem, leadership may be required to provide clarity regarding rules and what is needed toaccomplish assigned work. Finally, leaders may be required to encourage teamwork andacceptance of role responsibility when group norms and customs are weak.



Chapter 7: The Path-Goal Theory of Leadership 209

Path–goal theory has a special focus on assisting subordinates to get around, over,under, or through obstacles that are keeping them from achieving their tasks. Obstaclesmay be responsible for subordinates having feelings of frustration, uncertainty, and beingthreatened. Path–goal theory implies that leaders should assist subordinates in gettingaround these obstacles or in removing the obstacles from the path to task completion.Helping subordinates in this way will increase their perceived level of task ability and theirlevel of satisfaction and motivation.

House (1996) has reformulated path–goal theory by adding four new leader behav-iors. These are facilitating subordinates’ work, decision-making processes that are moregroup oriented, allowing work groups to network and represent themselves, and provid-ing leader behavior that is based on values that are not focused solely on the bottom line.The essence of the reformulated theory is no different from the original—subordinatesneed leaders who will provide what is needed in the subordinates’ environment and whatis needed to make up for deficient skills, knowledge, and abilities (Northouse, 2010).

How Does Path–Goal Leadership Theory Work?

Table 7.1 suggests several possible ways the path–goal theory of leadership can integrateleader behavior with subordinate and task characteristics. While the theory is conceptu-ally complex, it is also very pragmatic and gives direction to leaders with respect to assist-ing subordinates in accomplishing their work in a manner that provides them withsatisfaction and motivation. The theory assumes flexibility on the part of leaders and sug-gests that leaders should choose leader behaviors that best suit subordinate needs andwork situations. We provide some examples in the next paragraph.

Table 7.1 Path–Goal Theory: How It Works


Leader Behavior Group Members Task Characteristics

Directive leadership“Provides guidance andpsychological structure”

DogmaticAuthoritarian

AmbiguousUnclear rulesComplex

Supportive leadership“Provides nurturance”

UnsatisfiedNeed affiliationNeed human touch

RepetitiveUnchallengingMundane and mechanical

Participative“Provides involvement”

AutonomousNeed for controlNeed for clarity

AmbiguousUnclearUnstructured

Achievement oriented“Provides challenges”

High expectationsNeed to excel

AmbiguousChallengingComplex


First, if you as a leader see that the path is ambiguous, rules are unclear, and there iscomplexity and that subordinates are authoritarian and dogmatic, you should be a directiveleader to provide guidance and psychological structure. Second, if the work is repetitive, notvery challenging, mundane, and mechanical and if subordinates are unsatisfied, need ahuman touch, and have a higher need for affiliation, you should be a supportive leader todevelop and provide a nurturing atmosphere. Third, when you see that the path is ambigu-ous, the way is unclear, the task is unstructured, and subordinates have a need for autonomy,control, and clarity, you need to be a participative leader who invites subordinates into thedecision-making process. Finally, if the path is ambiguous, the task is challenging and com-plex, and subordinates have high expectations for what they can achieve and a higher needto excel, you need to be an achievement-oriented leader who challenges subordinates.

Of course, as we mentioned earlier, leaders may find it appropriate to exercise twoleader behaviors simultaneously. It may be that the situation and subordinate character-istics call for you as a leader to be achievement oriented and supportive (Dubrin, 2007).We find that in our teaching, we set a high standard for students to challenge them toachieve, and we offer as much support as possible (without doing the work for them) tohelp and encourage them to achieve to the best of their abilities. There is an ethical com-ponent to this leader behavior. You have to know your students well enough to haveexpectations for achievement on their part that are achievable.

Leaders who are effective meet subordinates’ needs. They help subordinates set goalsand determine the path to take in achieving these goals. Effective leaders assist subordi-nates in getting around, getting through, or removing obstacles. Finally, leaders are effec-tive when they assist subordinates in the achievement of their goals by guiding, directing,and coaching them along the right path.

yy ReferencesDaft, R. L. (2005). The leadership experience (3rd ed.). Mason, OH: Thomson, South-Western.Dubrin, A. (2007). Leadership: Research findings, practice, and skills. New York: Houghton Mifflin.House, R. J. (1996). Path–goal theory of leadership: Lessons, legacy, and a reformulated theory.

Leadership Quarterly, 7(3), 323–352.House, R. J., & Mitchell, R. R. (1974). Path–goal theory of leadership. Journal of Contemporary Business,

3, 81–97.McKinsey conversations with global leaders: Dan Vasella of Novartis. McKinsey Quarterly. Accessed on

August 6, 2006, from http://www.mckinseyquarterly.com/Strategy/Strategic_Thinking/McKinsey_conversations_with_global_leaders_Dan_Vasella_of_Novartis_2401

Northouse, P. G. (2010). Leadership: Theory and practice (5th ed.). Thousand Oaks, CA: Sage.Yukl, G. (2006). Leadership in organizations (6th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall.

yy The Cases

General Electric: From Jack Welch to Jeffrey Immelt

This case describes the leadership initiatives of two of General Electric’s (GE) chief execu-tive officers: Jack Welch and Jeffrey Immelt. Under Jack Welch’s leadership, GE, one of themost admired firms in the world, began its transformation from a manufacturing con-glomerate to one that focused on services. Welch’s stature as a management leader grewas GE’s stock price increased. Many of Welch’s management practices were adopted by



General Electric 211

American and global organizations. While his changes resulted in excellent financialperformance sustained over a long period of time, not all within GE agreed with hismethods. Welch’s departure in 2001 triggered a steep decline in GE’s stock price. His suc-cessor, Jeffrey Immelt, took over the company days before the terrorist attacks in September2001 and has spent the last few years preparing the firm for its next stage of growth.

Blinds to Go: Staffing a Retail Expansion

Blinds to Go is a manufacturer and retailer of customized window coverings. The com-pany has been steadily expanding the number of its stores across North America. The vicechairman is concerned with the lack of staff in some of these newly expanded stores. Withplans for an initial public offering within the next 2 years, senior management must deter-mine what changes need to be made to the recruitment strategy and how to develop staffthat will help them achieve the company’s growth objectives.

yy The Reading

Learning Goals or Performance Goals:Is It the Journey or the Destination?

Every manager has his or her eye on the finish line, but sometimes what you do or don’tdo during the race is more important than winning it.

Copyright 2008, Ivey Management Services Version: (A) 2008-04-18

General Electric

From Jack Welch to Jeffrey Immelt

Prepared by Ken Mark under the supervisionof Stewart Thornhill

yy Introduction

General Electric (GE) is a U.S. conglomeratewith businesses in a wide range of industries,including aerospace, power systems, healthcare, commercial finance and consumerfinance. In 2007, GE earned US$22.5 billion innet profit from US$170 billion in sales. In2008, GE expected to generate US$30 billion incash from operations. Driving GE’s growth

was what many commentators considered tobe the “deepest bench of executive talent inU.S. business,”2 the result of two decades ofinvestment in its management training pro-grams by its former chief executive officer(CEO), John F. (Jack) Welch, Jr. The currentCEO, Jeffrey Immelt, took over from JackWelch four days before September 11, 2001,and had spent the last few years preparing thefirm for its next stage of growth.


yy General Electric

GE’s roots could be traced back to a MenloPark, New Jersey laboratory where ThomasAlva Edison invented the incandescent electriclamp. GE was founded when Thomson-Houston Electric and Edison General Electricmerged in 1892. Its first few products includedlight bulbs, motors, elevators, and toasters.Growing organically and through acquisitions,GE’s revenues reached $27 billion in 1981. By2007, its businesses sold a wide variety ofproducts such as lighting, industrial equip-ment and vehicles, materials, and services suchas the generation and transmission of electric-ity, and asset finance. Its divisions included GEIndustrial, GE Infrastructure, GE Healthcare,GE Commercial Finance, GE ConsumerFinance, and NBC Universal.3

For more than 125 years, GE was a leaderin management practices, “establishing itsstrength with the disciplined oversight of someof the world’s most effective business people.”4

When he became chairman and CEO in1972, Reginald Jones was the seventh man to leadGeneral Electric since Edison. Jones focused onshifting the company’s attention to growth areassuch as services, transportation, materials andnatural resources, and away from electricalequipment and appliances. He implemented theconcept of strategic planning at GE, creating 43strategic business units to oversee strategic plan-ning for its groups, divisions and departments.By 1977, in order to manage the informationgenerated by 43 strategic plans, Jones addedanother management layer, sectors, on top of the

strategic business units. Sectors represented highlevel groupings of businesses: consumer prod-ucts, power systems, and technical products.5

In the 1970s, Jones was voted CEO of theYear three times by his peers, with one leadingbusiness journal dubbing him CEO of theDecade in 1979. When he retired in 1981, theWall Street Journal proclaimed Jones a “man-agement legend.” Under Jones’s administra-tion, the company’s sales more than doubled($10 billion to $27 billion) and earnings greweven faster ($572 million to $1.7 billion).6

Jack Welch Becomes CEO

In terms of his early working life, Welch had:

Worked for GE not much more than ayear when in 1961 he abruptly quit his$10,500 job as a junior engineer inPittsfield, Mass. He felt stifled by thecompany’s bureaucracy, underappre-ciated by his boss, and offended by thecivil service-style $1,000 raise he wasgiven. Welch wanted out, and to getout he had accepted a job offer fromInternational Minerals & Chemicalsin Skokie, Ill. But Reuben Gutoff, then a young

executive a layer up from Welch, hadother ideas. He had been impressed bythe young upstart and was shocked tohear of his impending departure andfarewell party just two days away.Desperate to keep him, Gutoff coaxedWelch and his wife, Carolyn, out to

212 CHAPTER 7: THE PATH-GOAL THEORY OF LEADERSHIP

2Diane Brady, “Jack Welch: Management Evangelist,” BusinessWeek, October 25, 2004. Available at http://www.businessweek.com/magazine/content/04_43/b3905032_mz072.htm, accessed November 12, 2007.

3http://en.wikipedia.org/wiki/General_Electric, accessed November 12, 2007.

4General Electric, “Our History: Our Company.” Available at http://www.ge.com/company/history/index.html, accessed June 4,2007.

5Christopher A. Bartlett and Meg Wozny, “GE’s Two-Decade Transformation: Jack Welch’s Leadership,” Harvard BusinessSchool Case, May 3, 2005, pp. 1–2.

6Christopher A. Bartlett and Meg Wozny, “GE’s Two-Decade Transformation: Jack Welch’s Leadership,” Harvard BusinessSchool Case, May 3, 2005, p. 2.



dinner that night. For four straighthours at the Yellow Aster in Pittsfield, hemade his pitch: Gutoff swore he wouldprevent Welch from being entangledin GE red tape and vowed to create forhim a small-company environmentwith big-company resources. Thesewere themes that would later dominateWelch’s own thinking as CEO.7

In his memoirs, Welch noted that theCEO’s job was “close to 75 per cent about peo-ple and 25 per cent about other stuff.”8

But Welch knew that his path to becomeCEO of GE was anything but smooth. As herecalled:

The odds were against me. Many of mypeers regarded me as the round peg in asquare hole, too different for GE. I wasbrutally honest and outspoken. I wasimpatient and, to many, abrasive. Mybehavior wasn’t the norm, especially thefrequent parties at local bars to celebratebusiness victories, large or small.9

For Welch, there was a seven-person“horse race” to become CEO that was, in hiswords, “brutal, complicated by heavy politicsand big egos, my own included. It was awful.”10

In the end, however, Welch prevailed, becom-ing CEO in April 1981. Later, he learned thathe had been left off the short list of candidatesuntil late into the process. Welch recalled:

I didn’t know that when the list was nar-rowed to ten names by 1975, I still wasn’t

on it. . . . One official HR [humanresources] view of me stated at the time:“Not on best candidate list despite pastoperating success. Emerging issue isoverwhelming results focus. Intimi -dating subordinate relationships. Seedsof company stewardship concerns.Present business adversity will severelytest. Watching closely.”11

1981 to 1987: Number One orNumber Two and Delayering

Welch wanted the company to do away with itsformal reporting structure and unnecessarybureaucracy. He wanted to recreate the firmalong the lines of the nimble plastics organiza-tion he had come from. He stated:

I knew the benefits of staying small,even as GE was getting bigger. Thegood businesses had to be sorted outfrom the bad ones. . . . We had to actfaster and get the damn bureaucracyout of the way.12

Welch developed this strategy based onwork by Peter Drucker, a management thinker,who asked: “If you weren’t already in the busi-ness, would you enter it today? And if the answeris no, what are you going to do about it?”13Welchcommunicated his restructuring efforts byinsisting that any GE business be the numberone or number two business in its industry, orbe fixed, sold or closed. He illustrated thisconcept with the use of a three-circle tool. The

7John A. Byrne, “How Jack Welch Runs GE,” BusinessWeek, June 8, 1998. Available at http://www.businessweek.com/1998/23/b3581001.htm, accessed June 4, 2007.8Jack Welch, Straight from the Gut, Warner Books, New York, 2001, p. xii.9Jack Welch, Straight from the Gut, Warner Books, New York, 2001, p. xii.10Ibid, p. xiii.11Ibid, p. 77.12Ibid, p. 92.13Ibid, p. 108.



businesses inside the three circles—services,high technology, and core—could attain (or hadattained) top positions in their industries. Theselected few included many service businesses,such as financial and information systems.Outside of the three circles were organizations inmanufacturing-heavy sectors facing a highdegree of competition from lower cost rivals,such as central air conditioning, housewares,small appliances and semiconductors.

Employment at GE fell from 404,000 in1980 to 330,000 by 1984 and 292,000 by 1989.The changes prompted strong reactions fromformer employees and community leaders.Welch was the target of further criticism whenhe invested nearly $75 million into a majorupgrade of Crotonville, GE’s managementdevelopment center.14 Welch saw leadershiptraining as key to GE’s growth.

In addition, Welch undertook a streamlin-ing exercise. By his estimate, GE in 1980 had toomany layers of management, in some cases asmany as 12 levels between the factory floor andthe CEO’s office. The sector level was removed,and a massive downsizing effort put into place.

Compared with the traditional norm of fiveto eight direct reports per manager, GE seniormanagers had 15 or more direct reports.Successful senior managers shrugged off theirworkload, indicating that Welch liberated themto behave like entrepreneurs. They argued thatthe extra pressure forced them to set strict pri-orities on how they spent their time, and toabandon many past procedures. Observersbelieved GE was running two main risks: havinginadequate internal communication betweensenior managers and people who now reportedto each of them; and the overwork, stress,demotivation and inefficiency on the part ofmanagers down the line who had extra workassigned by their hard-pressed superiors. In

1989, an article in the Harvard Business Reviewreported “much bitter internal frustration andill-feeling among the troops at GE.”15

During this period, Welch earned his“Neutron Jack” moniker, a reference to a typeof bomb that would kill people while leavingbuildings intact. On the other hand, Welchcould see that changes had to be made to makeGE more competitive. He recalled:

Truth was, we were the first bighealthy and profitable company in themainstream that took actions to getmore competitive. . . . There was nostage set for us. We looked too good,too strong, too profitable, to berestructuring. . . . However, we werefacing our own reality. In 1980, theU.S. economy was in a recession.Inflation was rampant. Oil sold for$30 a barrel, and some predicted itwould go to $100 if we could even getit. And the Japanese, benefiting from aweak yen and good technology, wereincreasing their exports into many ofour mainstream businesses from carsto consumer electronics.16

But Welch’s strategy was not simply a cost-reduction effort: from 1981 to 1987, while 200businesses were sold, 370 were acquired, for anet spend of $10 billion.

The turmoil that these changes causedearned Welch the title of “toughest boss inAmerica,” in a Fortune magazine survey of the10 most hard-nosed senior executives. In tally-ing the votes, Welch received twice as manynominations as the runners-up. “Managers atGE used to hide out-of-favor employees fromWelch’s gun sights so they could keep theirjobs,” Fortune said. “According to former

14Ibid, p. 121.

15“General Electric Learns the Corporate and Human Costs of Delayering,” Financial Times, September 25, 1989, p. 44.

16Jack Welch, Straight from the Gut, Warner Books, New York, 2001, pp. 125–126.



employees, Welch conducts meetings so aggres-sively that people tremble.”17 But Welch’s credi-bility was bolstered by GE’s stock performance:

After years of being stuck, GE stock andthe market began to take off, reinforc-ing the idea that we were on the righttrack. For many years, stock optionsweren’t worth all that much. In 1981,when I became chairman, optionsgains for everyone at GE totaled only $6million. The next year, they jumped to$38 million, and then $52 million in1985. For the first time, people at GEwere starting to feel good times in theirpocketbooks. The buy-in had begun.18

Late 1980s: Work-Out,Boundaryless and Best Practices

Welch used GE’s Crotonville facility toupgrade the level of management skills and toinstill a common corporate culture. After read-ing comments from participants, Welch real-ized that many of them were frustrated whenthey returned to their offices because many oftheir superiors had discounted the Crotonvilleexperience and worked actively to maintainthe status quo. Welch wondered:

Why can’t we get the Crotonvilleopenness everywhere? . . . We have tore-create the Crotonville Pit [a circular,tiered lecture hall at Crotonville] allover the company. . . . The CrotonvillePit was working because people felt freeto speak. While I was technically their“boss,” I had little or no impact on theirpersonal careers—especially in thelower-level classes. . . . Work-Out waspatterned after the traditional New

England town meetings. Groups of 40to 100 employees were invested to sharetheir views on the business and thebureaucracy that got in their way, par-ticularly approvals, reports, meetingsand measurements. Work-Out meantjust what the words implied: takingunnecessary work out of the system.19

Work-Out sessions were held over two tothree days. The team’s manager would start thesession with a presentation, after which themanager would leave the facility. Without theirsuperior present, the remaining employees,with the help of a neutral facilitator, would listproblems and develop solutions for many ofthe challenges in the business. Then the man-ager returned, listening to employees presenttheir many ideas for change. Managers wereexpected to make an immediate yes-or-nodecision on 75 per cent of the ideas presented.Welch was pleased with Work-Out:

Work-Out had become a huge suc-cess. . . . Ideas were flowing faster all overthe company. I was groping for a way todescribe this, something that might cap-ture the whole organization—and takeidea sharing to the next level. . . . Ikept talking about all the boundariesthat Work-Out was breaking down.Suddenly, the word boundarylesspopped into my head. . . . The bound-aryless company . . . would remove allthe barriers among the functions: engi-neering, manufacturing, marketing andthe rest. It would recognize no distinc-tion between “domestic” and “foreign”operations. . . . Boundaryless would alsoopen us up to the best ideas and prac-tices from other companies.20

17“Fortune Survey Lists Nation’s Toughest Bosses,” The Washington Post, July 19, 1984, p. B3.

18Jack Welch, Straight from the Gut, Warner Books, New York, 2001, p. 173.


20Ibid, pp. 185–187.



Welch’s relentless pursuit of ideas toincrease productivity—from both inside andoutside of the company—resulted in the birthof a related movement called Best Practices. Inthe summer of 1988, Welch gave MichaelFrazier of GE’s Business Development depart-ment a simple challenge: How can we learnfrom other companies that are achievinghigher productivity growth than GE? Frazierselected for study nine companies with differ-ent best practices, including Ford, Hewlett-Packard, Xerox and Toshiba. In addition tospecific tools and practices, Frazier’s team alsoidentified several characteristics common tothe successful companies: they focused moreon developing effective processes than on con-trolling individual activities; they used cus-tomer satisfaction as their main gauge ofperformance; they treated their suppliers aspartners and they emphasized the need for aconstant stream of high-quality new productsdesigned for efficient manufacturing. Onreviewing Frazier’s report, Welch became aninstant convert and committed to a major newtraining program to introduce Best Practicesthinking throughout the organization, inte-grating it into the ongoing agenda of Work-Out teams.21

To encourage employees to put extra effortinto reaching their goals, Welch instituted theidea of “stretch.” He was frustrated with thecompromise that was occurring as work teamstried to lower targets and top management triedto raise targets. With stretch, teams were askedto develop two plans: the first reflecting whatthey expected to do; and the second thatreflected the toughest targets they thought theyhad a chance of reaching. Welch explained:

The team knows they’re going to bemeasured against the prior year and rela-tive performance against competitors—not against a highly negotiated internalnumber. Their stretch target keeps themreaching. . . . Sometimes we found caseswhere managers at lower levels tookstretch numbers and called them bud-gets, punishing those who missed. Idon’t think it happens much anymore,but I wouldn’t bet on it.22

1990s: Six Sigma andthe Vitality Curve

One well-known program popularized by GEwas process improvement, or Six Sigma. As aresult of GE’s Best Practices program, Welchlearned from Lawrence Bossidy, a former GEexecutive, how AlliedSignal’s Six Sigma qualityprogram was improving quality, loweringcosts and increasing productivity. Welch askedGary Reiner, a vice-president, to lead a qualityinitiative for GE. On the basis of Reiner’s find-ings, Welch announced a goal of reachingSix Sigma quality levels company-wide by theyear 2000, describing the program as “thebiggest opportunity for growth, increasedprofitability, and individual employee satisfac-tion in the history of our company.”23

Subsequently, every GE employee underwentat least minimal training in Six Sigma, whoseterms and tools became part of the global lan-guage of GE. For example, expressions like“CTQ” were used to refer to customer require-ments that were “critical to quality” in newproducts or services.24




24Matt Murray, “Can GE Find Another Conductor Like Jack Welch?” The Wall Street Journal Europe, April 13, 2000.



Whereas Six Sigma was focused onprocess improvement, to develop GE’s talentpool, Welch looked to differentiate his peo-ple. He remarked: “In manufacturing, we tryto stamp out variance. With people, varianceis everything.” Welch knew that identifyingand ranking people in a large organizationwas not a simple task. GE began using whatbecame known as 360-degree evaluations, inwhich managers and supervisors were evalu-ated by their subordinates and their peers aswell as by their bosses. One exception wasWelch. He did not get evaluated by his subor-dinates. “I’ve peaked out,” he said. Nor did heevaluate the top executives immediatelybelow him.25

Next, Welch put in place an assessmentbased on a “vitality curve,” roughly shaped likea bell curve. He asked his managers to rank alltheir staff into the “top 20,” “the Vital 70” andthe “bottom 10,” with the intent to force exec-utives to differentiate their employees. The“top 20” were groomed for larger assignments,and the “bottom 10” were coached out of theorganization. In addition, Welch advocatedcategorizing employees as “A, B or C” players.He explained that how both assessment toolsworked together:

The vitality curve is the dynamic waywe sort out As, Bs, and Cs. . . . Rankingemployees on a 20-70-10 grid forcesmanagers to make tough decisions.The vitality curve doesn’t perfectlytranslate to my A-B-C evaluation oftalent. It’s possible—even likely—forA players to be in the vital 70. That’sbecause not every A player has theambition to go further in the organi-zation. Yet, they still want to be the

best at what they do. Managers whocan’t differentiate soon find them-selves in the C category.26

Welch reinforced the importance of theranking system by matching it with an appro-priate compensation structure. The A playersreceived raises that were two to three times theincreases given to Bs, and the As also receiveda significant portion of the stock optiongrants. C players received no raises or options.Welch admitted:

Dealing with the bottom 10 istougher. . . . Some think it’s cruel orbrutal to remove the bottom 10 percent of our people. It isn’t. It’s just theopposite. What I think is brutal and“false kindness” is keeping peoplearound who aren’t going to grow andprosper. There’s no cruelty like wait-ing and telling people late in theircareers that they don’t belong.27

In GE’s people review process, known as“Session C,” managers were expected to discussand defend their choices and rankings. Duringthese sessions, Welch was known to challengehis managers’ talent decisions aggressively,expecting them to defend their choices withpassion. Welch was prone to making quickjudgment calls on talent, and these snap deci-sions could be perceived both positively andnegatively. An observer commented:

Welch is impetuous, inclined to makelightning strikes and wage blitzkrieg.His decisions on people, assets, andstrategies can be made in a heartbeat;one bad review with Jack may be the

25Frank Swoboda, “Up Against the Walls,” The Washington Post, February 27, 1994, p. H01.


27Ibid, 2001, pp. 160–162.



end of a long career. And the recordshows that many of Welch’s snap deci-sions have turned out to be stupen-dous blunders.28

One example was Welch’s purchase ofKidder Peabody, then one of Wall Street’s mostprominent investment banks. Although hisboard of directors was opposed to the idea,Welch’s persuasive arguments carried the day.But merging the two cultures proved more dif-ficult than he imagined. Welch stated that atKidder Peabody, “the concept of idea sharingand team play was completely foreign. If youwere in investment banking or trading andyour group had a good year, it didn’t matterwhat happened to the firm overall.”29 In addi-tion, Kidder Peabody was hit by two publicscandals: insider trading and fictitious tradesthat led to a $350 million writedown. Anotherexample was NBC’s partnership with VinceMcMahon in January 2001 to launch the XFL,an alternative football league to the NFL. Afterlosing $35 million on the venture in fourmonths, and accompanied by falling viewer-ship, the league shut down in May 2001.30

Some managers were worn down by theconstantly evolving programs. A chemist whoonce worked for GE Power Systems stated:

It’s management by buzzword. Peoplechant Jack’s slogans without thinkingintelligently about what they’re doing.I’ve been stretched so much I feel likeGumby. All Welch understands is

increasing profits. That, and getting ridof people, is what he considers a vision.Good people, tremendous people, havebeen let go, and it is hurting our busi-ness. I’m trying to meet the competition,but his policies aren’t helping me. It’scrazy, and the craziness has got to stop.31

Welch believed otherwise: “No one at GEloses a job because of a missed quarter, a missedyear, or a mistake. That’s nonsense and everyoneknows it. . . . People get second chances.”32

Over his tenure as CEO, Welch hadgrown GE’s market capitalization by 27 times, from $18 billion to $500 billion.The company was trading 28 times forwardearnings versus about 24 for the Standard &Poor’s 500.33 See Exhibit 1 for selected GEinformation over 25 years.

After two decades as GE’s CEO, Welchretired, nominating Jeffrey Immelt as his suc-cessor. Immelt was one of three candidatesshort-listed for the job. Observers noted thatImmelt was “starting his tenure at the end ofan unprecedented bull market and in themidst of a global economic slowdown.”34

Despite GE’s consistent earnings growth evenduring the economic downturn, GE’s stockhad fallen 33 per cent from its high of about$60 per share in August 2000. Many attributedthis steady drop to the anticipation surround-ing Welch’s departure.35

Immelt’s first day on the job wasSeptember 7, 2001, four days before the terror-ist attacks in the United States.

28Thomas F. Boyle, At Any Cost, Vintage Books, New York, 1998, pp. 11–12.29Jack Welch, Straight from the Gut, Warner Books, New York, 2001, p. 222.30Eric Boehlert, “Why the XFL Tanked.” Available at http://archive.salon.com/ent/feature/2001/05/11/xfl_demise/index.html,accessed January 11, 2008.31Thomas F. Boyle, At Any Cost: Jack Welch, General Electric, and the Pursuit of Profit, Vintage Books, New York, 1998, p. 223.32Ibid, p. 274.33William Hanley, “An Eye on GE as Jack Bows Out,” National Post, August 23, 2001, p. D01.34Daniel Eisenberg and Julie Rawe, “Jack Who?” Time, September 10, 2001, p. 42.35Ibid.



The Transition FromWelch to Jeffrey Immelt

Immelt joined GE in 1982 and held severalglobal leadership positions in GE’s Plastics,Appliance and Medical businesses.36 At GEMedical, his last assignment before becomingCEO, Immelt became a star by:

persuading a growing number ofcash-strapped hospitals to trade in their

old-fashioned equipment for digitalmachines that were capable of generat-ing more dynamic images much faster.He inked lucrative, long-term deals withsuch hospital giants as HCA andPremier, and bought a number ofsmaller companies to round out hisproduct line, all the while growing GE’smarket share from 25 per cent to 34 percent and moving the company into ser-vices such as data mining.37

36“Jeff Immelt, CEO.” Available at http://www.ge.com/company/leadership/ceo.html, accessed January 6, 2008.

37Daniel Eisenberg and Julie Rawe, “Jack Who?” Time, September 10, 2001, p. 42.

GE Stock Price 1975–2008(Logarithmic, Adjusted for Dividends and Splits)

0.1

1

10

100

1000

1/2/

1975

1/2/

1977

1/2/

1979

1/2/

1981

1/2/

1983

1/2/

1985

1/2/

1987

1/2/

1989

1/2/

1991

1/2/

1993

1/2/

1995

1/2/

1997

1/2/

1999

1/2/

2001

1/2/

2003

1/2/

2005

1/2/

2007

$

Jack Welch becomes CEOStock: $0.65

Welch announcesretirement in 2001Stock: $9.31

Jeffrey Immeltbecomes CEOStock: $32.58

#1 or #2

Delayering,Bought 370 businessesSold 200 businesses

Work-Out!

Boundarylessness

Best Practices

Stretch

Six Sigma

e-business

SOURCE: Case writers. Stock information from finance.yahoo.com, accessed January 5, 2008.

Exhibit 1 GE: Selected Information From 1981 to 2008

($ billions) 1981 1986 1991 1996 2001 2006Revenues 27.2 36.7 52.3 79.2 125.9 163.4Net Profit 1.7 2.5 2.6 7.3 14.1 20.7


Only the ninth man to lead GE since 1896,Immelt followed in the footsteps of his prede-cessors by abandoning the leadership approachfavored by Welch. In contrast with Welch’s needto control and cajole his management, Immeltwas “less a commander than a commandingpresence.”38 “If you, say, missed your numbers,you wouldn’t leave a meeting with him feelingbeat up but more like you let your dad down,”said Peter Foss, a longtime friend and colleagueof Immelt’s and president of GE Polymerland,part of GE’s plastics business.39 Immelt believedthat leaders exhibited three traits:

It’s curiosity. It’s being good with peo-ple. And it’s having perseverance, hardwork, thick skin. Those are the threetraits that every successful person I’veever known has in common.40

Immelt aimed to continue GE’s transition“from a low-margin manufacturer to a morelucrative services company.”41 During Welch’stenure, although revenues from services hadgrown from 15 per cent of revenues to 70 percent, the majority of the revenues came from GECapital (renamed GE Consumer Finance and GECommercial Finance). In 2001, Immelt believedthere was still room to grow services in many ofits divisions, such as aircraft maintenance andmonitoring contracts, and medical software andbilling services.42 There were differences in strate-gic approach as well. Whereas Welch had courtedWall Street by setting—and hitting—pinpointearnings targets, Immelt gave the Street’s short-term demands a back seat to long-term strategy.

Whereas Welch rapidly rotated managersthrough different divisions to develop generalists,Immelt wanted to keep them in place longer todevelop specialists. Immelt explained:

I absolutely loathe the notion of pro-fessional management. Which is notan endorsement of unprofessionalmanagement but a statement that, forinstance, the best jet engines are builtby jet-engine people, not by appliancepeople. Rotate managers too fast,moreover, and they won’t experiencethe fallout from their mistakes—norwill they invest in innovations thatdon’t have an immediate payoff.43

By 2007, Immelt had divested GE units rep-resenting 40 per cent of revenues. To grow $20billion a year and more, new investments weremade in areas where sizeable players had anadvantage. Infrastructure and infrastructuretechnology, according to Immelt, was “a $70 bil-lion business that will grow 15 per cent a yearfor the next five years. That’s a business wheresmall people need not apply.”44 In addition,Immelt was focused on growing revenues inemerging markets such as China, India, Turkey,Eastern Europe, Russia, and Latin America.Immelt believed that the international arenawas where GE’s future growth would come:

In 2007, for the first time in the his-tory of GE, we’ll have more revenueoutside the United States that we’llhave inside the United States. Our


38Jerry Useem, “Another Boss Another Revolution,” Fortune, April 5, 2004, p. 112.


40David Lieberman, “GE Chief Sees Growth Opportunities in 2008,” USA Today, December 14, 2007, p. B1.


42Ibid.

43Jerry Useem, “Another Boss Another Revolution,” Fortune, April 5, 2004, p. 112.

44David Lieberman, “GE Chief Sees Growth Opportunities in 2008,” USA Today, December 14, 2007, p. B1.


Blinds To Go 221

business outside the United States willgrow between 15 per cent and 20 percent next year. We’re a $172 billioncompany. In 2008, with the U.S.

economy growing at 1.5 per cent, we’llgrow revenue by 15 per cent becausewe’re in the right places with the rightproducts at the right time.45

yy Introduction

“Staffing stores is our most challenging issue aswe plan our expansion across North America,”exclaimed Nkere Udofia, vice-chairman ofMontreal-based Blinds To Go (BTG). “Thereare locations now where we’ve got physicalstore buildings built that are sitting unstaffed.How are we going to recruit and developenough people to meet our growth objectives?What changes should our company make?” Itwas August 2, 2000 and Udofia knew that ifBlinds To Go was to continue to grow 50 percent in sales and add 50 stores per year, theissue of staffing would be front and centre.

yy The Developmentof the Blinds To GoRetail Concept

This retail fabricator of window dressings beganas a one-man operation. Growing up in theCôte-des-Neiges district in Montreal, Canada,David Shiller, the patriarch of the Shiller family,started in business in 1954. Stephen Shiller, hisson, joined the business in the mid-1970s, con-vincing his father to focus on selling blinds.Called “Au Bon Marché,” as it was known in

Quebec, the Shillers began to create the produc-tion system that allowed them to cut the normalsix- to eight-week delivery time frame for cus-tom blinds to 48 hours. The customer responsewas overwhelming and the business took off.

Stephen Shiller exclaimed:

We gave them food, kept them busywhile they waited for their blinds tobe ready. The factory was literally nextto the store and we offered our one-hour delivery guarantee, which keptour customers happy. Our St. Leonardstore, the prototype for the currentBlinds To Go stores, opened in 1991.Prior to that, people used to drive forup to 100 miles to come to our stores. At that point, in early 1994, we

realized what a hot concept we had onour hands—our sales were higher foreach consecutive store opened, andnone of our competitors could repli-cate our model. They were eithermanufacturers or retailers: none wereboth. None could hope to deliver the48-hour turnaround we promised,had our unique sales model, which is100 per cent commission-based, orhad our attention to customer needs.

Copyright 2001, Ivey Management Services Version: (A) 2001-10-09

45Ibid.

Blinds To Go

Staffing a Retail Expansion

Prepared by Ken Mark under the supervision of Fernando Olivera and Ann Frost



By June 2000, Blinds To Go operated 120corporate-owned stores across North America(80 U.S. stores, 40 Canadian stores), generatingin excess of US$1.0 million in sales per store(having a staff of between six to 20 people perstore). Blinds To Go expected to add an aver-age of 50 new stores per year for the next fiveyears, 80 per cent of which was targeted to beU.S. expansion stores.

yy Retail Operations

It was senior management’s belief that qualityof staff was even more important than storelocation, the surrounding customer demo-graphics or advertising. Stephen Shiller, presi-dent, tested this belief with the East Mississauga,Ontario store.

In 1999, the East Mississauga store hadexperienced declining sales and high employeeturnover. Analysing the demographic data sur-rounding the store left management with theimpression that the store was a victim of poorlocation and cannibalization from anotherBTG store 10 miles away. However, StephenShiller suspected that the real problem was inthe quality of the store’s staff. Stephen Shillercommented:

We let the store continue on its down-ward sales trend as we trained a man-agement team for this store. Although Iwas quite sure that the quality of peo-ple was at fault, I was determined touse this as a lesson to show the rest ofthe company how important it was tohave first-class talent. After six monthsof waiting, we put in an ‘A’ manage-ment team and trained staff. In oneweek, we doubled our sales and wetripled our sales in one month. Thatwas a lesson we must never forget.

There were four staff roles in the stores—the sales associate, the selling supervisor, the

assistant store manager and the store manager.The sales associates were the most junioremployees and their job was to follow a setplan to help walk-in customers purchase a setof blinds. If they proved to be consistent salesperformers, they would be promoted to sellingsupervisors or assistant store managers. Sellingsupervisors were assistant managers in train-ing and usually had been one of the best salesassociates. Assistant managers were in chargeof the store when the store manager was notscheduled to work. The store manager wasdirectly responsible for overall store opera-tions, including closing sales, motivating anddeveloping staff, and handling customer ser-vice issues such as repairs and returns.

Generally, a very good sales associate waspromoted to selling supervisor six to ninemonths after hiring date. To become a storemanager generally took another six to 18 months. However, because of the enormousvariation in personal potential, these progres-sion targets were by no means fixed.

The BTG selling process involved a veryhigh level of interaction with the customer,which set a very high level of service expecta-tion. At the retail stores, the emphasis on cus-tomer satisfaction and sale closure led to ahigher volume of orders relative to their retailcompetition. Outlined in the Blinds To GoUniversity Manual (training program for newsales staff) were the following four operatingguidelines:

• Service and Satisfy Every Customer• Never Lose a Sale• Make the Customer Feel Special• Bring the Manager Into Every Sale to

Give the Customer “Old Fashion Service”

Salespeople were expected to bond with acustomer through a personal greeting, then askopen-ended questions about their productneeds. The purpose of the next few minutes ofinterchange between associate and customerwas to understand the customer’s primary


Blinds To Go 223

concerns and work towards a sale by resolvingthose issues. Next, associates emphasized to thecustomer the quality of the product, largeselection and warranties. At this point, theassociate would listen to any customer objec-tions, and try to address them. The associatewould price the product(s), then introduce thecustomer to the store manager. After walkingthe store manager through the order, the asso-ciate would deduct any relevant coupons, thenattempt to close the sale.

All employees of BTG, even up to the pres-ident, prided themselves on being able to sellblinds to customers. During store visits, it wasnot uncommon to see senior managementhelping out the staff in dealing with an over-flow of customers.

yy Compensationof Retail Staff

The commission-based structure fostered ahigh-energy, sales hungry culture at Blinds ToGo. Todd Martin, the director of retail plan-ning and operations explained:

We know people come to us becausethey need blinds. An example of ourculture in action is a manager who is unhappy with closing eight of 10 sales, because with the tools at hisdisposal, he should be able to closeall 10. Even if the customer is justlooking because they want to buy ahouse in six months, we can taketheir worries away from them. Heshould be able to sell to 10 out of 10customers.

Todd Martin also believed there was ahealthy competitive environment among salesassociates. He offered:

In the store, there are no rules ongrabbing customers—in my two years

here, I’ve never seen a problem withstaff fighting for customers.

As BTG grew from a one-store operation,the Shillers kept a commission pay structurefor its salesforce, believing that it best moti-vated performance. From experience, theyknew that a suitable salesperson could, withthe commission structure, make more moneyat BTG than at a comparable retail outlet. Thefocus had been on hiring energetic, personablepeople who loved the thrill of a sale.

yy A Change in CompensationResults in Sales Decline

In 1996, the Shillers decided to change thecompensation system from full commission tosalary. This change was the result of a recom-mendation from a newly hired vice-presidentof store operation who had been the vice-president of a major U.S. clothing retailer. Herintention was to attract more recruits forBlinds To Go’s expansion phase by standardiz-ing store operations and compensation. At thattime, there were already 15 stores and expan-sion was underway. Based on her prior experi-ence at the U.S. retailer, she led the change fromfull commission to paying sales associates awage of Cdn$8 per hour. This was intended tomake sales associates less entrepreneurial andmore customer-service focused. Store managercompensation was also revised to reflect ahigher base salary component relative to com-missions. A more casual uniform was man-dated in place of the business casual attire thatwas being worn at stores. In an attempt to dif-ferentiate the roles of sales associates and storemanagement, it was decided that the storemanager would no longer be involved in thesale. Though skeptical of this recommendation,the Shillers reluctantly agreed to proceed assuggested, rolling out these changes in 1996.

Sales declined between 10 per cent to 30 percent in both new and existing stores from


1996 to 1997. Overall staff turnover increasedto more than 40 per cent from a pre-1995 fig-ure of 15 per cent. This problem was furtherexacerbated by the fact that rapid storeexpansion into Toronto, Philadelphia andDetroit had required the deployment ofskilled store staff, thinning the ranks of exist-ing stores. The Shillers attributed this declinein performance primarily to the change in thecompensation structure.

yy BTG Reverts toCommission-BasedCompensation

Unsatisfied with this turn of events, a changewas made in the leadership of the stores’ team.A variation of the commission-based com-pensation plan was brought back in May 1998(see Exhibit 1). Udofia explained why he


Exhibit 1 BTG Pay Structure History

Corporate Formula Original 1995 to 1996 Current

Sales Associate $3 to $5/hr + 3% sales $8/hr $6 to $8/hr minimum,or 6% sales (whicheverwas higher)

Managers/Assistants $10,000 to $20,000/yr+ 1.5% – 3% ofoverall store sales

$25,000 to $40,000/yr+ 0.25% – 0.5% ofoverall store sales

$10,000 to $20,000/yr+ 1.5% – 2.5% ofoverall store sales

Actual Results Original 1995 to 1996 Current

Sales AssociateTop 20% of class ($14,000/sales/week)

$620/wk $320/wk $840/wk

Sales AssociateAverage Success($10,000/sales/week)

$500/wk $320/wk $600/wk

Sales AssociateMarginal Performer($6,000/sales/week)

$380/wk $320/wk $360/wk

Sales AssociatePoor Performer($3,000/sales/week)

$290/wk $320/wk $240/wk

ManagerTop 20%(2.5% of store sales)

$75,000/yr $52,500/yr $67,500/yr

ManagerAverage Success(1.2% of stores sales)

$50,000/yr $40,000/yr $50,000/yr

ManagerPoor Performer

$35,000/yr $35,000/yr $40,000/yr


Blinds To Go 225

believed that commission was key to the salesculture of Blinds To Go:

When we made the 1996 change, thebase salary of $8/hour made it mucheasier to staff the store, but we wereattracting a lower caliber of people—our best commission-based peopledid not like it and left. Having learnedour lesson, we went back to our roots,brought back the old culture and

experienced a sales turnaround. But,we’ve never 100 per cent recoveredfrom it and are still playing catch-uptoday.

Since the return to commission-basedcompensation in 1998, store sales improvedacross the board, and within a few months,stores were posting between 10 per cent to 30 per cent increases in sales from the previousyear (see Exhibit 2).

Exhibit 2 Sales Turnaround

Pre-1994 1995 to 1996 1997 to 2000

New stores/year N/A 25 20

New store average sales $1 million $0.7 million $1.2 million

Versus comparable store sales year ago 3% –20% +15%

This dramatic turnaround was accom-plished with the aid of several other initiatives.First, all U.S. district sales managers (DSMs)were brought to Toronto to see top-performingstores, thus establishing a performance bench-mark. Next, a BTG employee stock option planfor store employees (all full-time sales associateswere made partners and given shares in thecompany) was implemented along with a salesaward and recognition program. Also, weeklydevelopment conference calls between seniormanagement and the district sales managers andtraining managers were set up for the purpose ofconstant updates and to facilitate group learn-ing. Finally, a manager/assistant training pro-gram was tested in the U.S. in early 1998.46

The 1998 shift back to commission causedanother huge turnover in BTG stores. This wasunfortunate, because, from a staffing perspective,

BTG had still not fully recovered from the pre-vious compensation change. The need foradditional staff was further aggravated due toBTG’s continued push for growth and the tightU.S and Canadian labor markets (four per centunemployment) in which it operated.

Another concern was that a commission-based compensation structure would not workin the U.S. Martin explained:

The U.S. folks seemed uncomfortablewith 100 per cent commission. Theyseem to prefer a straight wage or salary.Thus, we have not figured out our com-pensation system, but for now, it’slargely commission based. We know thatfor the people who are good, they willfigure out what they need and go get it.Commission for us is like an insurance

46 This program eventually evolved into the Legends Training Program, where the best training managers at BTG were relocatedto new regions to motivate, train and coach new store employees.


policy on our hires—the better you arethe more you make. If you don’t like ser-vicing the customers, you leave.

Along with the reversion to the proven BTGcompensation structure, Blinds To Go empha-sized the practice of promoting their managersfrom within. Senior management believed thatsales managers had to be properly motivatedand provided them with a combination of storesales commission and opportunities for rapidadvancement in the growing organization.However, being a top salesperson did not neces-sarily guarantee promotion, as Blinds To Goalso looked at a matrix of sales, drive, presence,and people skills. Martin explained: “So evenwith the top salespeople, they have to be solid intheir other attributes to be chosen for manage-ment. If the person is driven, he or she will askfor what it takes to be promoted.”

yy Attracting QualityRetail Sales Candidates

BTG was looking for people who possessed cer-tain sales-driven qualities. Martin explained:

We look for people who have the ‘giftof the gab,’ no ego, are honest, likesales, are driven and hungry for anopportunity, and have good leadershipand good people skills. People have topossess these core values. We’re part-ners—we want other people who wantto be our partners. We pay for perfor-mance. You bet on yourself. You getrewarded because you’re performing.Entry-level sales associates get 1,000stock options after 90-days. At anothersuccessful retailer start-up that hassince gone public, their people onlyreceived 500 options each.

Having recognized that quality of staff wasparamount, BTG devoted resources to ensure

that it hired the right people as it was estimatedthat 80 per cent of their expansion needs wouldbe for new U.S. stores. BTG store staff was verydiverse. In terms of gender, it was a 50/50 splitbetween men and women. Among associates,high school was the most common educationlevel, followed by college students, then collegegraduates. In Ontario, Canada, 20 per cent ofthe associates were recent immigrants who hadcollege or professional qualifications. The aver-age age of associates was distributed over a typ-ical bell curve between the ages of 18 to 50.

Over the last few years, BTG had tried sev-eral recruiting methods to varying degrees ofsuccess. There were several formal and informalprograms that worked to entice qualified per-sonnel to apply to BTG.

Employee Referral

Having current staff refer friends and family toBTG seemed to be the most effective way toattract a candidate already briefed on the BTGconcept. A recent addition to create an incen-tive to refer was the “BMW” contest where staffcould win the use of a BMW car for a year ifthey referred 10 eventual hires that stayed forat least three months. Employee referrals alonedid not currently satisfy BTG’s hiring needs.

Internet Sourcing

BTG used the Internet in two ways: BTGsolicited résumés at its blindstogo.com site;DSMs and recruiters actively searched onlinejob sites like Monster.com and other job sitesto contact potential candidates.

DSM Compensation Readjustment

To put more emphasis on staffing in early 2000,DSMs’ incentive bonus was changed from asales target to new staff quota target.Historically, district sales managers had receivedan incentive bonus based on sales. Thus, a largepart of the DSM’s role had evolved to include



Blinds To Go 227

recruiting responsibilities—the DSM now hadto hire 10 new sales associates a month.

BTG Retail Recruiters

Professional recruiters were hired in earlyFebruary 1998 and had been paid annual salariesranging from $30,000 to $60,000. Recruitersgenerate leads through cold calls (in-person andvia telephone), networking referrals, colleges,job fairs, the Internet, and employment centres.Even though they were given some training andrecruiting objectives, the initial recruiters hadaveraged around four hires per month (againstthe company objective of four hires a week).“Overall, the performance was sub-optimal,”lamented Martin. “By paying them a base salary,we divorced performance from pay and theybecame administrators.” For recruiters, a switchwas made in early 2000 to a mix of salary andcommission. “They will still need to average fourhires a week—but we’ve increased our trainingand the ‘per hire’ commission will focus them onresults,” Martin concluded.

Newspaper Advertising

BTG used weekly newspaper advertising fornine months starting in mid-1998. Althoughthis method generated a sufficient number ofcandidate leads, senior management believedthat this medium did not generate the qual-ity of candidates that it needed—newspaperadvertising attracted people who did notpossess the skills and core values that BTGwas looking for.

Store Generated Leads

Each BTG had a “help wanted” sign on its win-dow, and walk-in traffic, along with customerreferrals, resulted in some sales associatesbecoming hired. Overall, this was very success-ful only in stores located in densely populatedareas with foot traffic.

The Hiring Processat Blinds To Go

Once potential candidates were persuaded toapply, a store visit was arranged. The purposeof this visit was to acquaint the potential can-didates with the BTG environment and forthem to get an overview of the job of a salesassociate. Subsequently, the DSM administereda telephone interview. If the candidates wereselected to proceed beyond this screen, twoadditional face-to-face interviews awaitedthem—one with the DSM and another withthe store manager. BTG hired associatesagainst these six criteria:

1. “Gift for Gab”

2. Outgoing personality

3. Energetic and motivated

4. Honest

5. Likes sales or dealing with people

6. Positive

If the candidate was selected to be a salesassociate, then references were checked andoffers extended.

yy The Results ofHiring Procedures

Before collecting data, it was the impression ofsenior management at BTG that the mosteffective method of attracting quality candi-dates was employee referral, followed byInternet sourcing, and then DSM recruitment.To confirm their suspicions, BTG tracked theyield of different hiring methods for June andJuly 2000 and as of the end of July, had theresults shown in Table 1.

Martin explained that the highest ratio ofleads to hire was in the employee referrals. Thiswas partially attributed to the fact that referralsgenerally pursued employment with BTG,


excited by the opportunity that a friend orfamily member who was a BTG employee hadrecounted. Cold calling was thought to havethe lowest close rate because the recruiter hadto first educate, then convince potentialrecruits. But cold calling was thought to betime-efficient if the recruiter was good.Recruiters were focused on non-store sources(cold calling, Internet, schools, etc.), storesources (store walk-ins and employee refer-rals) were handled by the DSM. Recruiterswere now paid $20,000 a year with a bonus of$150 to $500 for each successful hire, definedas a hire who stayed at least three months.

yy Staff Turnover

BTG also began tracking staff turnover andhad created a turnover list from existing data(see Table 2). A large percentage of staff volun-tary turnover occurred in their first fourmonths. The higher turnover after eight

months was partly due to termination becauseof sales underperformance. Also, sales associ-ates who were not progressing as fast as theirpeers would inevitably be dissatisfied, leavingfor other jobs.

yy Blinds To Go Future Needs

BTG needed additional staff to proceed withits expansion plan of 50 stores per year and tofill current store requirements (see Table 3).

Udofia had one more pressing concern onhis mind:

We’re planning an initial public offer-ing in the next one to two years. Thekey to our success is our ability torecruit and develop enough people tomeet our growth objectives.

He wondered what strategy he should fol-low to meet the staffing challenge ahead.


Table 1 Yield of Different Hiring Methods

Recruiting Method June July Total (2 mth)

Cold Call (Recruiters) 9 0 9

Walk-ins 31 16 47

Internet 9 3 12

Employee Referral 39 20 59

DSM hires (Direct/Rehires/College) 8 8 16

Total 96 47 143

Table 2 Number of Staff Leaving and Length of Stay (Numbers from June and July 2000)

Length of Stay 1 to 4 Months 5 to 8 Months 8+ Months

Total 29 12 13


Learning Goals or Performance Goals 229

While setting goals is important, settingan outcome goal—rather than a learninggoal—can have a negative impact on anindividual’s performance. This is espe-cially true when acquiring skills andknowledge is more important than beingpersistent and working harder. Instead offocusing on the end result, a learning goalfocuses attention on the discovery of effec-tive strategies to attain and sustaindesired results. These authors build acompelling case for learning goals’ superi-ority and describe the positive impactthey can have on leadership, performanceappraisal, and professional development.

yy The Good and theBad of Setting Goals

Nearly all executives understand the importanceof goal setting. And yet, most organizations have

no idea how to manage specific, challenginggoals, or what are sometimes labelled “stretchgoals.” For example, some organizations may askemployees to double sales or reduce product-development time but fail to provide thoseemployees with the knowledge they need tomeet these goals. It is foolish and even immoralfor organizations to assign employees stretchgoals without equipping them with theresources to succeed—and still punish themwhen they fail to reach those goals. This lack ofguidance often leads to stress, burnout, and insome instances, unethical behaviour.

The Lucent scandal is a compelling exam-ple of what can happen when people feelundue pressure to make the numbers. RichardMcGinn, the former CEO of Lucent, pridedhimself for imposing “audacious” goals on hismanagers, believing that such a push wouldproduce dream results. In 2000, McGinnpushed his managers to produce results theycould not deliver—not, apparently, without

Table 3 Additional Staff Needs

Position Current ComplementExtra Personnel Needed for

Expansion (per year)

Sales Associate 1,000 500

Selling Supervisor 150 50

Asst. Store Manager 150 50

Store Manager 150 50

AUTHORS’ NOTE: The authors acknowledge the suggestions of Paul Beamish and Ed Locke in preparing this paper.

Copyright 2006, Ivey Management Services

Learning Goals or Performance Goals

Is It the Journey or the Destination?

By Gerard H. Seijts and Gary P. Latham


crossing the line. The pressures that McGinnapplied were described in a complaint that aformer Lucent employee filed, charging thatMcGinn and the company had set unreachablegoals that caused them to mislead the public.Empirical research supports this claim, namelythat setting unrealistic performance-outcomegoals sometimes causes people to engage inunacceptable or illegal behaviour.

These findings point to a fault with the typeof goal that was set, namely the performance-outcome goal. Setting a learning goal, on theother hand, is likely to be far more effective inhelping individuals discover radical, out-of-the-box ideas or action plans that will enableorganizations to regain and sustain a competi-tive edge. This paper discusses both types ofgoals and explains why learning goals can bemore effective and when it is more appropriateto use them.

yy Goal Mechanisms

Generally speaking, there are at least four ben-efits of setting goals.

1. Specific performance goals affect anemployee’s choice about what to focuson, or which actions are goal relevantand which are not.

2. Goals help employees adjust theireffort and persistence according to thegoal’s level of difficulty.

3. Goals help employees persist until theyhave reached them.

However, these three motivational mecha-nisms alone are not always sufficient forattaining a goal.

4. A fourth benefit of goal setting has to domore with cognition than motivation.Specifically, it has to do with the fact thata certain type of goal, the learning goal,helps employees acquire the knowledge

to understand and apply what they aredoing. For complex tasks, setting goalsbased on one’s knowledge stimulates thedevelopment of task strategies to com-plete those tasks. For example, theWeyerhaeuser Company discovered thatunionized truck drivers who had beenassigned a specific high-performancegoal in terms of the number of trips perday from the logging site to the millstarted to work “smarter rather thanharder.” After being assigned goals, truckdrivers developed tactics to attain them.These included the use of radios to coor-dinate their efforts so that a truck wouldalways be at the site when logs were avail-able for loading. Performance increasedbecause drivers drew on their existingknowledge to attain their goal. Whilethey already knew how to use a radio,they chose to apply this knowledge insuch a way that productivity increased.

yy Motivation orKnowledge Acquisition?

Goal setting is viewed by most executives andbehavioral scientists as a motivational tech-nique. The fact is, however, that most of thetasks that scientists have studied have beenstraightforward, so that the effect of a goal onan employee’s choice, effort, and persistencecould be easily assessed. But what happenswhen the task is not straightforward?Anecdotal evidence and empirical researchprovide a thought-provoking answer.

The ordeal of Wagner Dodge and the 15firefighters under his command illustrates thedifference between working hard (motivation)and working smart (knowledge acquisition).The ordeal is described by leadership expertMichael Useem in The Leadership Moment. Ahellish, fast-moving forest-and-grass firecaused the group to run for their lives. Withless than a minute remaining until the firewould swallow the group, Dodge discovered a




way for the group to survive. He started an“escape fire” that cleared a small area of flam-mable prairie grass and bushes. As Useemstates, Dodge survived because “he had literallyburned a hole in the raging fire.” However,Dodge’s crew ignored his order to jump insidethe expanding ring of fire and all of them diedwhile trying to outrun the blaze. For Dodge,working smart, that is, knowledge acquisition,led to a far better result than “working hard.”

In the context of running a successfulbusiness, Dell Computer Corporation CEOMichael Dell emphasizes the importance ofinformation and knowledge acquisition:

It’s all about knowledge and execution.Traditionally, it was thought that lackof capital was the barrier to entry intoa new competitive market. Take a lookaround, and you’ll see that’s just nottrue anymore. Information willincreasingly become both a tool to helpbusinesses hone their competitive edgeand a weapon to protect them againstthe competition. Besides Dell, there arecountless successful companies that arethriving now despite the fact that theystarted with little more than passionand a good idea. There are also manythat failed, for the very same reason.The difference is that the thriving com-panies gathered the knowledge thatgave them a substantial edge over theircompetition, which they then used toimprove their execution, whatevertheir product or service. Those thatdidn’t simply didn’t make it.

In sum, a person’s quest to be effective isinfluenced by ability and motivation, so thatin the end, performance is a function of cre-ative imagination or learning, AND sheereffort and persistence. This is particularly truefor tasks where an individual lacks the requi-site knowledge or skill to master those tasks.Thus, we see that setting a performance goalcan have a downside.

yy Performance-OutcomeGoals and Their Downside

Acquiring knowledge before setting a performance-outcome goal can be critically important. Onthe other hand, setting a specific performancegoal can damage a person’s effectiveness in theearly stages of learning. This is because in theearly stage of learning a person’s attentionneeds to be focused on discovering and mas-tering the processes required to perform well,rather than on reaching a certain level of per-formance.

This reality highlights the fact that the atten-tional demands that can be imposed on peopleare limited. Trying to attain a specific perfor-mance goal places additional demands on peo-ple, so much so that they are unable to devote thenecessary cognitive resources to mastering thetask. A performance-outcome goal often distractsattention from the discovery of task-relevantstrategies. For example, focusing on a score of 95may prevent a novice golfer from focusing onmastering the swing and weight transfer, andusing the proper clubs to shoot 95. Unwittingly,the golfer has diverted the cognitive resourcesnecessary for understanding the task to a self-regulatory activity, namely shooting 95. Thegolfer has focused on scoring at the expense ofacquiring the skills to become a better golfer. Inthe process, the golfer has exposed the downsideof setting a performance goal.

yy LearningGoals or Performance-Outcome Goals

That setting specific performance goals cansometimes actually worsen performance is atfirst glance astonishing in that this conclusionis at odds with the accumulated findings ofover a quarter of a century of research in thebehavioral sciences.

For at least three decades, this research hasshown that goal setting is a powerful and effective


motivational technique. Specifically, the researchshows again and again that a performance goalinfluences choice, effort, and the persistenceneeded to attain it. However, it is often forgottenthat performance at a high level is a function ofability as well as motivation. Consequently, wewondered what would happen if the goal of cer-tain tasks, say those for which minimal priorlearning or performance routines existed, wasswitched to knowledge acquisition instead ofmotivation. (In situations where learning ratherthan an increase in motivation is required, set-ting a specific performance goal is not likely to beprudent. Perhaps a specific high-learning goalshould be set instead. For example, a novicegolfer should consider setting a high learninggoal such as learning how to hold a club or whento use a specific iron. In short, the novice golfermust learn how to play the game before becom-ing concerned with attaining a challenging per-formance outcome [e.g., a score of 95].)

To test our idea, we examined the effects oflearning versus performance-outcome goals byusing a complex business simulation, namely,the Cellular Industry Business Game (CIBG).The CIBG is an interactive, computer-basedsimulation that is based on the events thatoccurred in the U.S. cellular telephone industry.It uses a complex set of formulas to link the var-ious strategic choices to performance outcomes.The CIBG consists of 13 rounds of decisionmaking, each corresponding to one year ofactivity. Participants were asked to make deci-sions concerning ten areas of activity duringeach round. Examples of the strategic optionsare pricing, advertising, sales-force, cost con-tainment, finance, geographic scope, andalliances with other companies. Each area ofactivity allowed numerous choices. For exam-ple, in the finance area, participants could raisefunds by issuing bonds, public shares or divi-dends, or by borrowing from the bank.

The evolution of the cellular telephoneindustry was predetermined in the simulation.For example, during the first eight decisionperiods (simulating the industry’s first eightyears) competition was restricted by region.

Following year eight, however, the telecommu-nications industry experienced a radical envi-ronmental change in the form of deregulation.Hence, participants in the simulation weregiven several warnings that deregulation waslikely to occur. The strategic options that wereviable before deregulation were no longereffective. Thus, to maintain or increase marketshare, participants now needed to discover anew set of strategies. This aspect of the CIBGsimulation reflects a business environmentwhere past success strategies are by no means aguarantee for future success.

The participants assigned a specific high-learning goal were told to identify and imple-ment six or more strategies for increasingmarket share. The results revealed that:

1. Performance was highest for individu-als who had a specific high learninggoal. Their market share was almosttwice as high as those with a perfor-mance outcome goal. There was no sig-nificant difference in performanceamong individuals with a performancegoal, or those who were simply urgedto do their best.

2. Individuals who had a learning goaltook the time necessary to acquire theknowledge to perform the task effec-tively and to analyze the task-relevantinformation that was available to them.

3. Those with a learning goal were con-vinced that they were capable of master-ing the task. This suggests that theincrease in self-efficacy resulting from alearning goal occurs as a result of the dis-covery of appropriate strategies for taskmastery. A performance goal, on theother hand, can lead to a highly unsys-tematic “mad scramble” for solutions.

4. Those with a learning goal had a highercommitment to their goal than didthose with a performance goal. Thecorrelation between goal commitmentand performance was also significant.




These research findings are consistentwith the observations of the CEOs citedthroughout the paper.

yy Why Learning Goals?

How does a learning goal differ from a perfor-mance-outcome goal? What explains the superi-ority of a learning goal over a performance goalfor a complex task? How can specific challenginglearning goals be applied in business settings?

Learning Goals, Performance Goalsand the Efficacy of the Former

The primary distinction between performanceand learning goals lies in the framing of theinstructions given to employees. Hence, the dif-ference between these two types of goals is firstand foremost a “mindset.” The respectiveinstructions focus attention on two differentdomains-motivation versus ability. A perfor-mance goal, as the name implies, frames theinstructions so that an employee’s focus is ontask performance (e.g., attain 20 percent mar-ket share by the end of the next fiscal year). Thesearch for information to attain the goal is nei-ther mentioned nor implied because knowl-edge and skills are considered a given for tasksthat require primarily choice, effort, or persis-tence. Similarly, a learning goal frames theinstructions in terms of knowledge or skillacquisition (e.g., discover three effective strate-gies to increase market share). A learning goaldraws attention away from the end result to thediscovery of effective task processes. Once anemployee has the knowledge and skills neces-sary to perform the task, a specific performancegoal should be set to direct attention to theexertion of effort and persistence required toachieve it. The performance goal cues individ-uals to use strategies or performance routinesthat the person knows are effective. Setting alearning goal for a task that is relativelystraightforward wastes time. It is also ineffec-tive in that the person has already mastered the

requisite performance routines and is aware ofthe requisite job behaviors.

In short, learning goals help peopleprogress to the point where performance-outcome goals increase one’s effectiveness. Thefocus of a learning goal is to increase one’sknowledge (ability); the focus of a performancegoal is to increase one’s motivation to imple-ment that knowledge. Therefore, both learningand performance goals are needed to be suc-cessful. But, as noted earlier, our research showsthat a performance goal should not be set untilan employee has the knowledge to attain it.

Practical Applicationsof Learning Goals

Based on our findings, as well as the experiencesof the CEOs we have cited, there are at least 3areas where the application of learning goalsshould prove particularly helpful in improvingperformance—leadership, performance man-agement and professional development.

1. Leadership

Jack Welch once stated that, “An organization’sability to learn and translate that learning intoaction is the ultimate competitive advan-tage. . . . I wish we’d understood all along howmuch leverage you can get from the flow ofideas among all business units . . . the enor-mous advantage we have today is that we canrun GE as a laboratory for ideas.”

Three examples suggest the benefits ofhaving a leader focus employee attention onthe attainment of learning goals. First, whenAndy Grove was the CEO at Intel Corporation,he was obsessed with learning as much as pos-sible about the changing environment.

In Grove’s own words, “I attribute Intel’sability to sustain success to being constantly onthe alert for threats, either technological orcompetitive in nature.” Second, Sam Waltoncontinued to refine his business strategies anddiscover ways for improving his stores. He neverstopped learning from competitors, customers,


and his own employees. He believed that therewas at least one good idea he could learn, evenfrom his worst competitor. Walton passed onthis philosophy to his employees. As KurtBernard, a retailing consultant, noted:

When he meets you . . . he proceeds toextract every piece of information inyour possession. He always makes lit-tle notes. And he pushes on and on.After two and a half hours, he left, andI was totally drained. I wasn’t surewhat I had just met, but I was sure wewould hear more from him.

Leaders such as Welch, Grove and Waltonwould increase the effectiveness of their work-force if they set specific high learning goals forsharing ideas among divisions, identifying poten-tial threats in the environment, or extracting ideasfrom competitors, customers and employees.

Third, the primary use of learning goals atGoldman Sachs, as described by Steve Kerr, isto develop present and future leaders. Forexample, a sales manager might be asked tojoin or even lead a taskforce whose goal is todiscover a new process for product develop-ment. People’s leadership skills are developedby assigning specific learning goals that requirethese people to go outside their comfort zone.

2. Performance Management

Coca-Cola Foods and PricewaterhouseCoopers(PWC) are among the many companies thathave incorporated goal setting into their coach-ing and mentoring practices. The goals are typ-ically performance outcomes or behavioralgoals that are within employees’ repertory ofknowledge and abilities to increase in fre-quency (e.g., communicate the objectives of theprogram to coworkers).

PWC, which recognizes that this approachis not effective for every employee, also setslearning goals. For example, like other organiza-tions, they hire job applicants for their aptituderather than their existing skills. New employees,

therefore, benefit from mentors who activelyhelp them discover ways to develop their com-petencies within the firm, and who assign themspecific, high learning, rather than perfor-mance, goals. Employees assigned challenginglearning goals in the early stages of their jobtypically outperform those who are initiallygiven specific high performance targets.

Learning goals are also appropriate for sea-soned managers. For example, those who oper-ate in global organizations find it fruitful tofocus on ways to effectively manage a myriad ofsocial identity groups so as to minimize rigid-ity, insensitivity, and intolerance. Newlyformed work teams, especially culturallydiverse teams, need time to gel. Ilya Adlerobserved that managers view, “the culturalissue as an additional burden to the already dif-ficult task of making a team function effec-tively.” Focusing on the end result before teamdynamics have been ironed out can hurt theteam’s performance. Thus, a team leader maybe well advised to focus on the discovery of 3–5strategies, processes, or procedures for acceler-ating effective interaction and teamwork, par-ticularly ways of fostering understanding oflocal customs and values and developingmutual understanding and trust. In contrast,assigning a culturally diverse work team a spe-cific performance goal before the team’s rulesof conduct have become accepted is likely tolead to prolonged “storming” and “norming.”Indeed, it is not uncommon to see culturallydiverse teams spend more time working outtheir differences than doing the actual work.

3. Professional Development

Jack Welch often moved his top executives fromone functional area to another. Similar to thementoring practice at PWC, he did this tobroaden their knowledge base. When this is donein any organization today, employees should beasked to come up with a specific number of ideasthat would help them improve the performanceof their respective businesses. Welch also intro-duced the Work-Out, a forum that was intended




to enable management and employees to shareknowledge. Facilitators of these types of sessionsshould be asked to set a goal of discovering a spe-cific number of ideas or strategies that willimprove organizational effectiveness.

Other executives also ensure the ongoingprofessional development of their seniorexecutives through job rotation. The purposeof the rotation is to “shake the executives up,”provide them with opportunities to learn newperspectives, get them out of their comfortzones, and develop greater creativity. Toensure that this occurs, specific learning goalsshould be set to ensure that the broad per-spective to which the executives are exposedactually helps the company make decisions ina cohesive fashion.

yy In the End, GoalsCan Be Different

Today’s workforce is under intense pressure toproduce tangible results. Workers are perpetu-ally in a “performance mode.” This is a pluswhen known performance routines continueto be effective, and when the issue is fosteringthe conditions for a highly motivated work-force. In such instances, countless studies inthe behavioral sciences support the significantmotivational benefits of setting specific, chal-lenging performance goals.

However, a high-performing workforce is afunction of both high ability and motivation.This is particularly true in today’s business envi-ronment in which organizations face rapidlychanging technologies, information overload,escalating competitive pressures, and a host ofother challenges. Hence the importance ofknowing that learning goals and performancegoals are different. They differ in the behav-ior/actions required to attain them and in theirappropriateness for increasing an organization’seffectiveness.

The purpose of a learning goal is to stimu-late one’s imagination, to engage in discovery,and to “think outside the box.” The purpose of aperformance goal is to choose to exert effort andto persist in the attainment of a desired objectiveor outcome using the knowledge one alreadypossesses. Thus, the behavior of a person with alearning goal is to systematically search for newideas, actively seek feedback, be reflective, andexecute a specific number of ideas in order totest newly formed hypotheses. The behavior of aperson with a performance goal is to focus onknown ways to use the knowledge and skills thathave already been mastered. When the strategyfor an organization is already known and theways to implement it have been deciphered, set-ting performance goals for an individual or teamis appropriate. When an effective strategyrequires innovation that has yet to emerge, spe-cific high learning goals should be set.


Chapter 7 The Path-Goal Theory of Leadership.pdf

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