GE’s chief executive Jack Welch had long claimed that his insistence on SMART goals was one of the reasons the company’s stock had more than tripled in eight years. But forcing people to detail their goals with such specificity didn’t mean every part of the company ran smoothly. Some divisions, despite setting SMART goals, never seemed to excel—or they would flip-flop from profits to losses, or seem to be growing and then suddenly fall apart. In the late 1980s, executives became particularly concerned about two divisions—a nuclear equipment manufacturer in North Carolina and a jet engine plant in Massachusetts—that had once been among the company’s top performers but were now limping along.
Executives initially suspected those divisions simply needed better-defined objectives, so factory managers were asked to prepare memo after memo describing increasingly specific goals. Their responses were detailed, precise, and realistic. They met every SMART criterion.
And yet, profits still fell.
So a group of GE’s internal consultants visited the nuclear factory in Wilmington, North Carolina. They asked employees to walk them through their weekly, monthly, and quarterly goals. One plant executive explained that his SMART objective was to prevent antinuclear protesters from harassing workers as they entered the plant, because he felt it eroded morale. He had come up with a SMART plan to build a fence. The goal was specific and reasonable (the fence would be fifty feet long and nine feet high), it had a timeline (it would be done by February), and it was achievable (they had a contractor ready to go).
Next, the consultants went to the jet engine factory in Lynn, Massachusetts, and interviewed, among others, an administrative assistant who told them her SMART goal was ordering the factory’s office supplies. She showed them a SMART chart with specific aims (“order staplers, pens and desk calendars”) that were measurable (“by June”), as well as achievable, realistic, and had a timeline (“Place order on February 1. Request update on March 15.”).
Many of the SMART goals the consultants found inside the factories were just as detailed—and just as trivial. Workers spent hours making sure their objectives satisfied every SMART criterion, but spent much less time making sure the goals were worth pursuing in the first place. The nuclear factory’s security guards had written extensive memos on the goal of theft prevention and had come up with a plan that “basically consisted of searching everyone’s bags every time they entered or exited the plant, which caused huge delays,” said Brian Butler, one of the consultants. “It might have stopped thefts, but it also destroyed the factory’s productivity because everyone started leaving earlier each day so they could get home at a decent hour.” Even the plants’ senior executives, the consultants found, had fallen prey to an obsession with achievable but inconsequential goals, and were focused on unimportant short-term objectives rather than more ambitious plans.
When the consultants asked employees how they felt about GE’s emphasis on SMART goals, they expected to hear complaints about the onerous bureaucracy. They anticipated people would say they wanted to think bigger, but were hamstrung by the incessant SMART demands. Instead, employees said they loved the SMART system. The administrative assistant who ordered office supplies said fulfilling those goals gave her a real sense of accomplishment. Sometimes, she said, she would write a SMART memo for a task she had already completed and then put it into her “Done” folder. It made her feel so good.
Researchers who have studied SMART goals and other structured methods of choosing objectives say this isn’t unusual. Such systems, though useful, can sometimes trigger our need for closure in counterproductive ways. Aims such as SMART goals “can cause [a] person to have tunnel vision, to focus more on expanding effort to get immediate results,” Locke and Latham wrote in 1990. Experiments have shown that people with SMART goals are more likely to seize on the easiest tasks, to become obsessed with finishing projects, and to freeze on priorities once a goal has been set. “You get into this mindset where crossing things off your to-do list becomes more important than asking yourself if you’re doing the right things,” said Latham.
GE’s executives weren’t sure how to help the nuclear and jet engine factories. So in 1989, they asked a professor named Steve Kerr, the dean of faculty at the University of Southern California business school, for help. Kerr was an expert in the psychology of goal setting, and he began by interviewing employees inside the nuclear factory. “A lot of these people were really demoralized,” he said. “They had gone into nuclear energy because they wanted to change the world. Then Three Mile Island and Chernobyl happened, and the industry was getting protested every day and completely brutalized in the press.” Setting short-term goals and achieving them, the plant’s workers and executives told Kerr, was one of the few things they could feel good about at work.
The only way to improve performance at the nuclear factory, Kerr thought, was to find a way to shake people out of their focus on short-term objectives. GE had recently started a series of meetings among top executives called “Work-Outs” that were designed to encourage people to think about bigger ambitions and more long-term plans. Kerr helped expand those meetings to factories’ rank-and-file.
The rules at Work-Outs were simple: Employees could suggest any goal they thought GE ought to be pursuing. There were no SMART charts or memos. “The concept was that nothing was off-limits,” Kerr told me. Managers had to approve or deny each suggestion quickly, often right away, and “we wanted to make it easy to say yes,” said Kerr. “We thought if we could get people to identify the ambition first, and then figure out the plan afterward, it would encourage bigger thinking.” If an idea seemed half-baked, Kerr said, a manager should “say yes, because even if the proposal is no better than what you’re doing now, with the group’s energy behind it, the plan will turn out great.” Only after a goal was approved would everyone begin the formal process of determining how to make it realistic and achievable and all the other SMART criteria.
At a Work-Out inside the engine factory in Massachusetts, one worker told his bosses they were making a mistake by outsourcing construction of protective shields for their grinding machines. The factory could make them in-house for half the cost, he said. Then he unfurled a piece of butcher paper covered with scribbled blueprints. There was nothing SMART about the man’s proposal. It was unclear if it was realistic or achievable, or what measurements to apply. But when the factory’s top manager looked at the butcher paper, he said, “I guess we’ll try it out.”
Four months later, after the blueprints had been professionally redrawn and the plan transformed into a series of SMART goals, the first prototype was installed. It cost $16,000—more than 80 percent less than the outsourced bid. The factory saved $200,000 that year on ideas proposed at the Work-Out. “Everybody gets caught up in this tremendous rush of adrenaline,” a team leader at the plant, Bill DiMaio, said. “The ideas that people come up with are so encouraging, it’s unbelievable. These people get psyched. All their ideas are fair game.”
Then Kerr helped take the Work-Out program company-wide. By 1994, every GE employee within GE had participated in at least one Work-Out. As profits and productivity rose, executives at other companies began imitating the Work-Out system inside their own firms. By 1995, there were hundreds of companies conducting Work-Outs. Kerr joined GE full-time in 1994 and eventually became the company’s “chief learning officer.”
“The Work-Outs were successful because they balanced the psychological influence of immediate goals with the freedom to think about bigger things,” said Kerr. “That’s critical. People respond to the conditions around them. If you’re being constantly told to focus on achievable results, you’re only going to think of achievable goals. You’re not going to dream big.”