Examining Goals and Performance Management

Question 1: The key principles of goal-setting theory and reinforcement theory and the extent to which they are evident in the case study

The goal-setting theory was developed in 1960 by Edwin Locke and Gary Latham. The theory is found on the premise that the primary source of motivation is the intention of an employee to direct his/her work to a goal (Aleksić-Glišović et al. 2019). Through goal setting, an employee gains a deeper understanding of what needs to be achieved and therefore an understanding of how much effort will be needed to achieve the goal (Cote 2019). It is therefore goal setting that determines the behaviour of the employee. The goal-setting theory has three key principles namely specificity, challenge and feedback: specific goals are believed to lead to higher performance as compared to general goals, challenging goals have better effect on performance as compared to easy goals, and progressive feedback on the goas promotes performance and it helps the employee to see the gap between ideal and real performance (Cote 2019). Form a different perspective, Mu et al. (2017) argue that goal-setting has four principles namely (1) goal commitment, which refers to the level of effort that an employee makes in order to achieve the goal, (2) goal specificity, which assesses how clear the goals are to the employees, (3) goal acceptance, which relates to the goal-setting process and how employees are expected to achieve the set goals, and (4) goal difficulty, which focuses on making the goals challenging in order to motivate higher performance. Reinforcement theory on the other hand uses either positive or negative reinforcers to control human behaviour. Gordan and Krishanan (2014) note that using favourable (positive) consequences encourages employees to repeat actions while unfavourable (negative) consequences discourage employees from repeating the actions that led to the punished outcome.

From the case study, the Community Bank has an aggressive sales culture and therefore sets goals that are challenging to achieve with an aim of motivating employees to achieve higher performance. Although setting harder goals is a principle of the goal setting theory, the case study notes that the goals set by the Community Bank were unattainable and increasingly unrealistic, which influenced Wells Fargo employees to violate the rules of the bank as long as they met the sales goals. In addition, there were negative consequences such as termination and career-hindering criticism by supervisors if employees did not attain the unrealistic goals. According to Landers et al. (2017), employees are only able to achieve high performance when their work assignments are neither too difficult nor too simple such that they are able to develop their skills and meet the set goals. However, this is not the case in the case study since the goals are unrealistic and unattainable to many employees which resulted in various types of misconduct among employees. Therefore, although the goal difficulty principle is evident in the case study, the goals are too difficult forcing employees into misconduct which eventually has detrimental effects on the company’s performance.

The goal setting theory emphasises that specific goals lead to higher performance. In the case study, the goals set cannot be said to be very clear to the employees in that employees are not involved in the goal-setting process. Instead, the goals are set by the Community Bank and then pushed down to Wells Fargo retail bank branches and employees in these branches are assessed based on these goals. According to Khan et al. (2017), allowing employees to participate in the goal-setting process (participative goal setting) has prevalent effect of employee performance and conduct since employees have a better understanding of the goals and they understand what efforts they need to make in order to achieve the set goals. In agreement, Park et al. (2016) argue that participative goal setting is more effective in enhancing performance in that all the involved parties understand the goals and are in complete support of the goals. Locke and Latham (2013) state that specific goal setting helps in achieving authoritative objectives and therefore lack of specificity and employee involvement in goal setting in the case study can be attributed to employee misconduct as they seek to achieve the set goals. Were the goals clear and specific enough, the employees would have understood what ethical practice was as they sought to attain the set goals.

The goal setting theory acknowledges the role of progressive feedback in helping employees achieve the set goals and achieve higher performance. According to Landers et al. (2017), the management should provide feedback on results so that employees are motivated to increase their level of performance and strive to achieve the next organisational goals. On the other hand, Welsh and Ordóñez (2014) argue that the management should provide employees full support to achieve the set goals. In the case study, the initiatives taken by Wells Fargo and the Community Bank such as motivator reports, retail scorecards, and sales campaigns pile pressure on employees rather than supporting them to attain the set objectives. For example, in the motivator reports, employees are ranked against each other, which led to the belief that performance was measured by selling more than others in the company; this approach overlooks the fact that employees have different capabilities and therefore could be a source of turnover. In addition, the report shows that the company does not provide feedback in the form of training thus most employees are inexperienced to attain the set goals. The result of this has been employees doings things how they know well as long as they achieve the set goals, which has led to the reported fraud scandals. For goal-setting to be effective in promoting performance, Presslee et al. (2013) note that there should be specific goals and feedback should be provided to individual employees about their progress in relation to the set goals which is not evident in the case study: a mistake that could be attributed to the fraud scandal.

Other than failure for the company to effectively use the goal setting theory, Wells Fargo ineffectively uses the reinforcement theory and ignores its principles. Although the company has reward programs, the adopted retain model means that the company promotes only persons that have outstanding sales performance even though they lack management skills. In addition, the company uses negative reinforcement such as terminating and penalising employees for failing to meet the sales goals despite the fact that the sales goals are unrealistic and unattainable in many cases. According to Wei and Yazdanifard (2014), recognising employees for job well done is a form of reward which will encourage employees to work even harder. This is not evident in the case study: when employees fail to achieve the unrealistic goals, they are punished regardless the efforts they made to attain what they attained, which discourage employees and influence high turnover. Therefore, we can conclude that the key principles of goal setting and reinforcement theory are not observed by Wells Fargo, a mistake that can be attributed to the reported fraud scandal.

Question 2: Ways of adapting elements of performance management to eliminate the reported fraudulent practices

Performance appraisal process

Performance appraisal can be defined as an ongoing process of evaluating employee performance. In the Wells Fargo case study, it is evident that the organisation measures employee performance solely based on sales performance which is attributed to the fraudulent practices. In order to eliminate the fraud scandals, it is recommendable that the organisation adopts a standard performance appraisal process that considers (1) job analysis, (2) standards and measurement methods, (3) informal performance appraisal coaching and disciplining, and (4) define the way to conduct the formal performance appraisal (Dal Corso et al. 2019). In job analysis, the management should consider the duties that every employee is expected to perform and these should be aligned to the mission and objectives of the organisation. This step will allow the organisation to communicate the performance expectations to employees and promote accountability in that employees understand what is expected and how they should attain it. Second, the management should develop standards and measurement methods such as appraisal forms to ensure that all employees are fairly and uniformly assessed. When employees believe that the appraisal system is fair, they will be motivated to work harder, which will enhance performance (Jacobs et al. 2014). Third, the management should prepare training with an aim of coaching all persons within the organisation how to use the appraisal methods and forms and how the results will be communicated. This form of communication will ensure employees understand their progress and receive support to achieve the set goals, which will promote performance. In addition, feedback from supervisors will provide employees the opportunity to learn and grow (De Waal 2013), which will ultimately promote performance. Pulakos et al. (2015) also note that feedback from supervisors reduce employee uncertainty thus motivate them to continue making effort to meet the set goals. For Wells Fargo, performance feedback should be a resource for employees to regard the performance appraisal process as a useful tool to motivate performance: employees given performance feedback are more likely to be competent in their job (Brown et al. 2019). Wells Fargo’s management should prepare the formal performance appraisal and define when they will be conducted.

Reward system

Organisations provide rewards to employees with an aim of motivating behaviour that will contribute to the achievement of the goals of the organisation (Ngwa et al. 2019). However, rewards are only effective at promoting performance if employees place value on the rewards they receive as a result of performing a job (Wasiu and Adebajo 2014). This implies that for a reward system to help Wells Fargo eliminate the fraudulent practices, employees must feel that they are being equitably rewarded and they value the rewards. Therefore, as part of developing the reward system, the management should involve employees to find out what rewards (intrinsic or extrinsic) they value and would promote performance. Given that the overall aim of the reward system should be to support the attainment of the goals and objectives of the organisation, part of the rewards should be training and development opportunities to ensure that employees have the skills needed to achieve the goals (Shields et al. 2015). Training and development will also make sure that employees understand what is right thus avoid fraudulent practices as they seek to achieve the set goals. According to Edirisooriya (2014), some employees value financial rewards while others place value on non-financial rewards and therefore Wells Fargo should combine both financial and non-financial rewards to ensure all employees are motivated to achieve their goals. In agreement, Karami et al. (2013) write that good remuneration should contain elements that intrinsically and extrinsically motivate employees, which leads to employee performance and allows employee to focus on development of their work in terms of ethics, knowledge, skills, and effectiveness. An effective reward system should be constantly fine-tuned and its effectiveness regularly evaluated to ensure that the system constantly captures employee motivation (Shields et al. 2015). This implies that the adopted reward system should constantly increase the desire for employees to attain higher standards and have higher satisfaction in their job for Wells Fargo to attain high organisational performance. Finally, Khan et al. (2013) point out that when employees meet or surpass the set goals, they expect to be rewarded immediately as a way of motivating them and therefore Wells Fargo should tie rewards to performance and act on immediate basis for them to succeed in eliminating the fraudulence practices and enhance performance.

Disciplinary process (managing poor performance)

It is within the duties of performance managers to initiate disciplinary procedures when employees’ performance is unsatisfactory or when the employees exhibit unacceptable behaviour (Hill et al. 2018). Before the disciplinary actions are taken against any employee, the manager should clearly define poor performance such that employees know it when they perform poorly (Weenink et al. 2017). In addition, managers should clearly articulate expectations about what is expected from every employee and involve individual employees in this process (Saundry et al. 2015). When employees fail to attain the set goals or act unethically, Hill et al. (2018) state that managers should act in a flexible and positive way so as to reduce the likelihood of problems becoming entrenched and escalating to more overt conflict between employees and managers or among employees; thus, managers should in as much as possible avoid formal disciplinary sanctions. Nonetheless, some actions call for formal sanctions especially if they significantly affect the organisation and other employees (Hill et al. 2018). A study conducted by Traynor et al. (2014) shows that many managers lack skills and confidence to take disciplinary actions against non-performing employees and therefore recommends that managers should undergo training in managing poor performance. In this line, it is advisable that Wells Fargo conduct training on employees to equip them with skills of handling poor performance without discouraging employees or exerting more pressure on them.

References

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