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I love setting goals. I know a lot of you readers are big goal-setting fans too. There are some key factors in effective goal setting:

• The goal must be achievable. You never know what you can achieve until you set a nearly impossible goal for yourself. Take The 60kProject, for example - paying off over $60,000 of debt in one year. However, on a day-to-day basis, setting goals that you can achieve is key. If, deep down, you think you cannot complete your goal, you will not work as hard to make it a reality.
• You should be able to define steps that you can take to help you achieve the goal. If your goal is to lose weight, you cannot just weigh yourself after a month and see if you me your goal. You can pick a certain number of calories to stick to each week - that's something that you can choose to either do or not do. But you cannot just choose to lose weight and have it happen with no interim steps.
• There must be some way to measure your success. Your goal should be measurable. Instead of saying you want to lose weight, you will decide that your goal is to lose 10 lbs. You can measure when you've accomplished that by using a scale.

These are the big, goal-setting requirements. But these standards, especially the third, can be abused. Maybe you lost 10 lbs by starving yourself, rather than eating healthy and working out. You may be less healthy now than you were before you lost the weight. But you have to make sure you understand that being healthy is what you ultimately are trying to achieve, not just having 10 fewer lbs on your body.

So when a company like a consulting company has employees bill their time by the hour, they tend to reward employees that work more hours, and have a high realization. While their goal may be aligned with these measureable factors (get more money), their other goals may include providing high quality service, and a creating loyal relationships with clients.

The goal that is easy to measure may push these other goals to the sidelines. And the quantitative performance measures could be masking actual performance. Maybe two employees worked the same amount of hours, and had the same realization, but one of these employees was on a difficult, low-paying client, and managed to work efficiently enough to compensate for the low pay. Maybe one of the employees worked as many billable hours as the other, but angered clients along the way, destroying customer loyalty.

Companies fall back on using quantitative measures, because they seem like an objective and easy way to judge employee performance. Other measures appear more subjective, and firms shy away from these, since they are more difficult to apply evenly.

But in reality, employee performance cannot be reduced to a few statistics. Managers need to be involved with workers, and need to use their own judgement to assess whether an employee’s performance align’s with the firm’s goals.