Do Personal Goals Have a Dangerous Side?

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A recent Boston Globe article entitled “Ready, Aim… Fail” discusses the failure of setting a major goal at GM:

In the early years of this decade, General Motors had a goal, and it was 29. Determined to boost its flagging profits and reverse a long, steady fall from postwar dominance, the automotive giant did the natural thing: it set a goal. The company pledged to recapture 29 percent of the American market, the share it had ebbed past in 1999. The number 29 became a corporate mantra, and some GM executives took to wearing lapel pins with the number emblazoned on them.

It didn’t work. GM never did regain 29 percent of the market, and today, facing the possibility of bankruptcy, it looks even less likely to do so. The lapel pins are gone, and that number isn’t much heard from the company.

And while the causes of GM’s woes are many – from poor design to high labor costs to a prostrate economy – industry analysts argue that one of the most damaging things the company did was to set that goal.

In clawing toward its number, GM offered deep discounts and no-interest car loans. The energy and time that might have been applied to the longer-term problem of designing better cars went instead toward selling more of its generally unloved vehicles. As a result, GM was less prepared for the future, and made less money on the cars it did sell. In other words, the world’s largest car company – a title it lost to Toyota last year – fell victim to a goal.

In other words, GM set an audacious goal but they sacrificed too much to get there, which not only made it impossible to reach that goal, but undermined what they already had. They set a long term goal, but they used short term tactics to get there. Instead of long-term planning (designing better cars, streamlining their production models, offloading less-profitable business segments), they went short-term by doing things like drastically cutting prices, offering loans that undermined their financing business, and pushing forward with poorly-optimized manufacturing facilities.

It’s easy to apply this idea to personal finance. Let’s say, for example, that your goal is to be debt free. You need to ask yourself a very simple question: is your goal simply to reach a point of debt freedom at all costs, or do you want to be sustainably debt free?

If your goal is to just reach a point of debt freedom at all costs, then you’re likely to engage in things like cashing out your 401(k), emptying your emergency fund (and not building one at all), going hyper-frugal, delaying necessary repairs and maintenance, and so on. This plan is the quickest way to get to debt freedom if everything goes perfectly, but it is far from a guarantee. If something goes wrong, you’ve got very little protection against it and your only recourse is more debt.

On the other hand, if you seek sustainable debt freedom, it will take substantially longer to get there, but once you’re there, you’ll stay there. This plan involves building an emergency fund, saving now for retirement and other big future expenses (like future vehicles and education), keeping up with proper maintenance on your home and health and automobiles, adopting reasonable lifestyle changes that can be sustained and still leave you with a high quality of life, and so on. These moves won’t get those debt bills paid nearly as fast, but when you finally do reach debt freedom, you won’t be facing a devastated personal finance landscape.

I look at it much like climbing a tree. Sure, you can make it to the top much faster if you leap wildly from branch to branch, jumping and reaching out for your next position and quickly swinging upwards. However, doing that puts you at a big risk: you can easily fall right to the bottom of the tree and possibly break an arm or a leg. On the other hand, you can climb the tree a bit more slowly, choosing your holds carefully and positioning your feet strongly. Using that technique increases the likelihood that you’ll make it to the top, albeit not quite as fast.

A big, audacious goal is powerful and useful. It gives you something to strive for and it pushes you to do better than before. For example, my big, audacious goal is the country house I’ve often mentioned on here – a nice house on a piece of land in the country with a small barn and room for a big garden and a chicken pen. It pushes me to be frugal and to make good personal finance choices.

However, if you follow your big, audacious goal too blindly, you’ll fall from the tree. I might be able to get that big house a bit faster if I stripped my Roth IRA and my 403(b) and my emergency fund, stopped performing maintenance on our car and our home, and cut out all of the little things that make our life enjoyable. But what happens if an emergency occurs along the way? What about when I finally buy that house – and I realize I have no retirement savings and have missed many years of compound interest, I have no emergency fund, and I have two poorly maintained vehicles? I’m facing another mountain, with goals that I can’t entirely recover (those years of retirement savings and college savings are gone forever).

Reach for your big goal – but do it from a strong foundation. Get an emergency fund in place. Start saving appropriately for retirement. Take care of your requirements at work (before reaching for the big promotion or the second career). Maintain the things you own. Take care of yourself.

That foundation will make any big goal reachable. Without it … you might find yourself going the way of GM.

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34 thoughts on “Do Personal Goals Have a Dangerous Side?

  1. I always think of goals as those short term tactics that you discuss, and my dreams as my big audacious goals. Do you find that calling it a goal instead makes it seem more attainable?

  2. Trent this article is right on the money. I think that thinking extremely short term is what got us into the financial crisis in the first place. If everyone believed in the slow and steady but boring sustainable approach to saving, investing and paying off a house without being too greedy, then the unemployment rate would have been much lower..

  3. GM’s problem was that they wanted to achieve that goal by selling the same old substandard automobiles. The only nod to “innovation” was a minor cosmetic change here, or a new feature (DVD player, anyone) there. In the end, though, they got smacked by higher quality imports that sold for the same price.

    Part of having a goal is having a map to achieve it. Think of a goal as the end of a route; the arrival at a destination. GM’s goal was “29% by hook or by crook.”

    Saturn was an attempt to build a car like the Japanese. When it didn’t work they poured more money into the label rather than kill it off. Having so many brands meant that research funds were limited, and there wasn’t a lot of sharing across platforms despite similar body styles.

    Add to that exhorbitant labor costs and you see why GM failed. They weren’t a victim of their own success at all. Remember, they once held 50% of the US auto market and their new goal was… 29%? They were a victim of ineptitude. Poor leadership, indifferent workers, no innovation, and no detailed goal aside from a number.

    GM lost me years ago. Ford lost me even farther back. A number wasn’t going to get me back, nor was a poorly made hunk of junk at a cheap price. Heck, if I wanted that I could have bought a ’99 Kia.

  4. Good points Trent. Setting long terms goals should be realistic. However, like GMs fail on their goals, its sometimes inevitable that our goals might cause strife towards others as we aim for them.

    When I set goals, i usually work backwards from that point to see what I actually need to accomplish in order to reach that position.

  5. I think another thing that is important is building off of that strong foundation with “ladder-able” goals. Something achievable, something sorta small – just so you can cross it off your list and feel good and move up to another thing.

  6. I agree with a lot of what you say here Trent, but I have to add that there are times when a person must take a risk and get intense in accomplishing their goals. If there is no intensity or a person doesn’t break out of their comfort zone, the attempt is lackluster at best. I’m not saying that a person should put themselves at risk for a financial hardship or their lives in a precarious situation, but they shouldn’t be afraid of taking a risk for sake of failure.

    I write a lot about what it takes to accomplish your goals on my website hundredgoals.com and I discuss quite a bit about planning and getting things in order, educating yourself and preparation, but never once would I suggest that a person not be passionate about their goals and dreams. I don’t think that is what you are saying, but I think it is important to note that we cannot live cautiously our entire lives. There are moments when the best opportunities in life require risks.

    I’d encourage your readers to check out my site, I think it is pretty good! :)

  7. Everything has a dangerous side – it’s taking the time to adequately assess your risk with your current plan and the missed opportunities from other plans/routes that most people/businesses do not do. I can choose to become hyper-frugal and only eat bread and rice for every meal, but I wouldn’t adequately assess the risk to my health if I did so (Am I getting the proper balance of foods according to the nutritional pyramid? Am I taking in enough calories?). Same with the business plan – I can slash the cost of my product, but is the lost income better than the sunk cost of improving factory productivity? Maybe my labor contract with my workers makes the factory improvement MORE expensive than the slashed product cost, so choosing option A is financially better, even though hindsight shows it is not.

  8. Getting 29% market share is “a mean to an end”. The basic purposes of a business is make money and to be able to sustains itself indefinitely.
    Gaining market shares aggressively while not making money for a short-term period is a valid business strategy.

    Strategies either succeeds or fails. GM failed in this case. Though, there should not be any shame in failing. Sometimes, we are not good enough, not smart enough, or not lucky enough. Never lose sight of your goals and learn from your mistakes are some of the cliches that you should know.

    Financial freedom is just “a mean to an end”. What is your end goal? What do you want to do before you die? Where’s your bucket list?

    The basic purpose of a human being is pretty simple. Statisfy your physcological, safety, love, esteem, and self-actualization needs in the order precribed. Just don’t make the mistake of dwelling too much in one need that you ignore the next one; e.g., saving up wads of cash just to satify your safety needs when $100K (for now) will do.

  9. I think this is very translateable when it comes to issues of health and weightloss too, something I think Trent and I are both focused on.

    You could crash diet and lose that 10 pounds, but that would be a short-term method, and wouldn’t help you sustain the weight-loss and you would quickly regain the weight. The better course is to make long-term lifestyle changes to implement a sustainable healthy lifestyle and make sure that when you do lose that weight you are in position to maintain that weightloss.

  10. Interesting take. I’d look at it more this way: anytime your goal focuses on a single metric, you’re probably going to fail long-term. You need to have a broader vision with milestones on the way. Any business with a goal to grow business by 15% every year is eventually going to fail. If your only goal is to get down to 200 lbs, you might make it, but you probably won’t be happy there. You’ve got to put metrics in context, because numbers aren’t everything. It’s easy to cook the books, crash diet, etc. You’ve got to have something that has meaning outside of an accounting ledger. Our brains like simple measurable goals and that’s definitely the way to make progress, but if you lose sight of why that goal is important and why you’re taking the time to measure it, the goal will become meaningless soon enough.

  11. I struggle with this with my athletes. It’s certainly possible that setting time goals for various distances in track or for our cross country distance could cause some athletes to become discouraged if they don’t make their goal time. On the other hand, having something to strive for can be a powerful motivator for some. Conversely, if their goal is too easily achieved, they might lose motivation once they reach their goal.

    The same issues could affect personal finance goals.

  12. We to often set goals and forget about all the little steps in between. We get so blinded by the future we totally forget to live in the present.

    Thinking about the future is a good thing, but letting it dominate every action you take has a negative effect on your daily life.

    Build that foundation and from there you go up. The bigger the foundation te less likely it’s all going to come crashing down.

  13. Trent,
    I also disagree with the BG. The problem isn´t in laying out big goals. GM´s goal was a vision to inspire the company. However, it appears that poor planning led them away from the prize.
    Great post!

  14. The problem is not setting goals, but rather choosing the correct ones. A narrow goal that sets a target number is meaningless unless the goal setter has a basic strategy in place – and that strategy needs to be systematically evaluated on a periodic basis, such as the end of each month.

  15. I have a tendency to go at goals blindly from time to time.

    I’m super passionate about debt reduction, but so far have done a decent job at maintaining balance. I thought this way a fantastic recap of what many people struggle with on a daily basis!

  16. Motorola did exactly the same thing. They set a goal to be market leader in the cell phone business by the end of 2006. Instead, their cell phone business started losing money, to the point of dragging down the rest of the company into the red; instead of becoming market leader they slowly started going down to 3rd, 4th…

  17. The problem is that we are all motivated to strive for the stars but so few of us are realistic with our goals. I know that my blog will never be a top blog but I would be happy if I could have a 1000 followers because that would mean that 1000 people care about what I have to say.

  18. I have to agree with Steven (#5). There is a dangerous side to goals, but without them, we wouldn’t get anywhere. Humans crave self-improvement, and some goals require a little blindness and audacity.

  19. This article really spoke to me today as my wife and I struggle to pay off our remaining debt. We’ve been at it for so long, and have sacrificed so much, that we have sort of grown to resent that debt snowball plan.

    My vehicle is falling apart, our furniture is broken, our retirement funds are way behind, and we don’t have adequate savings for our children’s college years.

    If we continue on the same track, once we hit debt freedom we’ll be scrambling to replace the car and the sofa, and will be trying to play catch up with retirement and college savings.

  20. Goals are important and necessary. Without goals we’re simply wandering aimlessly.

    But a goal alone isn’t going to get you what you need. You have to do the right things and make the right choices in order to hit your goal.

    So for GM’s sake, the goal in question isn’t whats to blame. What GM did to try to hit their goal was the problem.

  21. I see this often @ the company where I work. (A Fortune 10 Company). The challenge is that often the ostensible goal does not match the ultimate outcome desired. For instance, in the GM example, the goal would have needed to include parameters around profit margins and other variables to make any sense. Unfortunately, a badge that said “29 and maintain margins” would be onerous.
    I have a goal of losing 20 pounds. Cutting off my leg to do so would probably accomplish it, but I suspect I would be less than thrilled with the result.
    What you most frequently notice is people quite naturally managing towards the metrics that will make them a bonus at the expense of other qualities. The people who establish the metrics are often daft. They often build the metrics with no cognizance of the ramifications. One thing I know, if you set a metric for performance and it does not map in the real world to the outcome you desire you are in for a heap of trouble. AND, it is MUCH HARDER TO PROPERLY SET METRICS than anyone would guess.

  22. This is a great article, and it makes a point I’ve never run across before.

    This is going to help me think through my choices on a big decision I’ve been wrestling with lately.

    Thanks!

  23. I’d say this is something that I’ve been struggling with for a long time–it took me awhile to get away from extremes and understand this kind of goal setting sustainability, and I still forget sometimes. Thanks for a succinct reminder.

  24. Trent: You have a great way with words. I like the way you compare goals with climbing a tree. As an ex-tomboy who has raised 4 boys, this really made the right impression. I’m really looking forward to your next book. Are you in the process of writing another book?

  25. This is the first time I’ve felt compelled to comment here. The line “They set a long term goal, but they used short term tactics to get there” really struck a chord with me. I really need to evaluate not only my goals but the strategies I employ to get there.

    Fantastic blog entry.

  26. Great article Trent.

    I suspect it may be ok to have just one goal, even for a company. The book “Good to Great” by Collins seems to indicate a single goal is a marker of success (he calls it the hedgehog principal).

    Their goal seems to be a bad one (as others mentioned). They could have reached 29% market share by giving away cars. Presumably they had related goals or assumptions (such as making a profit on a car).

    This translates well to ones personal life – particularly when a stated goal is to be financially independent. Most of us could do that now by quitting our jobs and using our savings to live in poverty in the streets. Of course the quality of life would be terrible but the goal would be met.

    Patrick_C, I think, hit the nail on the head. Obtaining 29% market share was (or should have been) an intermediate objective to some more worth while goal.

    This lesson translate well to personal finance in my opinion- goals should never be about the dollars but something that does good while causing minimum harm. Trent’s articles really resonate with me because they almost always connect a financial step with his worthwhile objectives in an eloquent way.

    Certainly, it

  27. Another important thing: setting a goal is important and has to view all aspects of it’s achievemet. Let me explain. 29% of the market, 29% of sold cars for one or several years can be achieved with or without profit!!! If you set a goal, make sure to set all sides of it accordingly. If you want to have a 1 000 000$ a year of business, make sure you focus on having 100 000 or 200 000$ profits. You probably won’t be happy with 1M$ business, and 1,5M$ expensess.
    As the old saying goes: beware what you wish for!

  28. So very true Trent… without trying to sound like a shameless plug, I’d encourage you and your readers to check out my recent 10 part series on goals.

    I use a balance scorecard approach that is designed to dampen the risk of chasing one goal front too aggresively.

    Life is multi-faceted and so too should be our goal structure.

    Take a couple mins and check it out then let me know what you think!

    Thanks!!
    Dave

    http://doyoudaveramsey.com/goal-setting-man-full/

  29. This is a great article that points out that goals have to be guided by vision. Attaining the goal for the sake of the goal will leave the goal achiever weak and with a sense of disillusion…wondering at the end of the day what the sacrifice was for.

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