Professor of Entrepreneurship
Corporate Governance; Board Process and Remuneration at the Top ;
Goal setting and performance feedback are essential elements of organizational design with significant implications for strategic change and organizational performance.Systems to set goals and monitor performance are found in nearly all organizations, and have effects on decisions that complement those of organizational structures. They have especially strong effects on goal pursuit, exploration versus exploitation balance, risk taking, and coordination.The design of such systems has not kept up with our knowledge of how they affect people, however, so they can be greatly improved by taking a behavioral perspective on performance feedback.We have learnt that firms improve their processes and alter their strategy when performance feedback signals problems. We also know firms take excessive risks under the same condition. Firms can fail to make necessary strategic changes because performance feedback systems overlook new opportunities.The author reviews the major effects of performance feedback on organizational goal attainment and discuss how performance feedback systems can be designed and implemented to meet the 21st century opportunities and challenges.