Will Setting Goals Prevent Innovation?

Lai, John Hon-weng（賴漢榮）

By Jaymee Ng, Principal Writer, China Business Knowledge @ CUHK

Innovation is vital to businesses around the world as it sparks new opportunities and helps companies to penetrate markets faster and more efficiently. An innovative company is likely to survive and adapt to the rapidly changing business environment and flourish in today’s competitive business world.

How exactly does innovation happen? The first thing that comes to mind when building an innovative company is that one needs to hire a team of employees that can really think outside the box. But, how can the management ensure that their team members are actively generating new ideas? What needs to be done to create a working environment that encourage continuous innovation?

Innovation, by definition, means new ideas or new methods, as well as the process of finding new ways to do things. An innovative company will constantly seek ways to bring new things into their business to increase efficiency and productivity. One way of enhancing innovation within the company is by setting clear and specific goals for each team unit. The goal setting theory, developed by American psychologists Edwin Locke and Gary Latham, argues that setting detailed goals would prompt greater effort and cohesion among team members, which would generate innovation internally as a result of focused teamwork.

However, knowledge of team members could be insufficient for innovation. Instead, new knowledge is often acquired externally. Organizational learning theory suggests that new knowledge is often generated when the outcome of a certain task differs from expectation and learning occurs through interacting with fellow members. In this case, innovation is generated by obtaining help and learning from the experiences of other people.

A recent study conducted by Dr. John Lai, Assistant Dean (Undergraduate Studies), Director MSc in Management Programme at Chinese University of Hong Kong (CUHK) Business School provides a fresh perspective on team innovation by investigating the complex relationship of goal clarity and innovation. The study was conducted in collaboration with Steven Lui, Associate Professor at the University of New South Wales Business School; Ben Nanfeng Luo, Associate Professor of the School of Labour and Human Resources at Renmin University of China; and Peter Moran, Associate Professor at CEIBS, China. The study was presented at the 32^nd European Group of Organisation Studies conference in Naples, Italy in July 2016.

“We find that goal clarity is a double-edged sword for the outcome of team innovation… A clear goal reduces the amount of knowledge a team will seek from other teams.”

“We find that goal clarity is a double-edged sword for the outcome of team innovation,” Dr. Lai comments, highlighting the potentially negative effect of goal clarity on the relationship between inter-team trust, organizational learning, and innovation.

The researchers built the study on 175 retail shops of a leading apparel retail firm based in Hong Kong and mainland China. The team leaders and members were asked to complete two different questionnaires, measuring their opinions on team innovation, inter-team trust, knowledge inflows and goal clarity. Shop staff were asked to comment on how well they understood the goals and the future direction of a store, trust of their own store in the goodwill of other stores, and the type of knowledge acquired into the store. After analyzing the data, the results confirmed the researchers’ hypothesis of having clear goals can increase and reduce team innovation at the same time through different ways.

Normally speaking, goal clarity, which often entails a clear and shared vision among team members, would stimulate team cohesion and direct their attention on specific tasks, and thus has a positive direct effect on team innovation. Ironically, while goal clarity can promote focused attention and cohesion among team members, having a strong bond between team members may lead to conformity and consensus. In other words, a fully focused, well-tasked team is less likely to seek help from external peers. In other words, the team would have less opportunities to receive new, external knowledge.

“A clear goal reduces the amount of knowledge a team will seek from other teams. A team will only seeks relevant knowledge related to its goals and will focus on using familiar knowledge conforming to its goals. However, unfamiliar knowledge is often needed to generate innovation,” says Dr. Lai.

According to the study, innovation achieved within the team is a result of goal clarity. But, trusting external peers can lead to the acquisition of new knowledge, which also contributes to team innovation. Since a fully consolidated team is less likely to reach out to other teams for help and less likely to utilize the new knowledge obtained from other teams, it loses the ability to generate innovation from external resources.

“As new knowledge often resides outside an organizational unit, trust with external parties is crucial for the learning process to occur,” Dr. Lai explains. “Integrating the two theories is important because a team draws simultaneously from both external and internal resources, and it is their interactive effects that results in innovation.”

“Understanding this mediating mechanism fills an important gap in our current understanding on how trust works in organizations,” says Dr. Lai. “Our study thus represents an important addition to studies on the relational view of business.”