Goal setting involves the development of an action plan designed to motivate and guide a person or group toward a goal. Goal setting can be guided by goal-setting criteria (or rules) such as SMART criteria. Goal setting is a major component of personal-development and management literature.
Studies by Edwin A. Locke and his colleagues have shown that more specific and ambitious goals lead to more performance improvement than easy or general goals. The goals should be specific, time constrained and difficult. Difficult goals should be set ideally at the 90th percentile of performance assuming that motivation and not ability is limiting attainment of that level of performance. As long as the person accepts the goal, has the ability to attain it, and does not have conflicting goals, there is a positive linear relationship between goal difficulty and task performance.
The theory states that the simplest most direct motivational explanation of why some people perform better than others is because they have different performance goals. The essence of the theory is fourfold. First, difficult specific goals lead to significantly higher performance than easy goals, no goals, or even the setting of an abstract goal such as urging people to do their best. Second, holding ability constant, as this is a theory of motivation, and given that there is goal commitment, the higher the goal the higher the performance. Third, variables such as praise, feedback, or the involvement of people in decision-making only influences behavior to the extent that it leads to the setting of and commitment to a specific difficult goal. Fourth, goal-setting, in addition to affecting the three mechanisms of motivation, namely, choice, effort, and persistence, can also have a cognitive benefit. It can influence choice, effort, and persistence to discover ways to attain the goal.
Edwin A. Locke began to examine goal setting in the mid-1960s and continued researching goal setting for more than 30 years. Locke derived the idea for goal-setting from Aristotle's form of final causality. Aristotle speculated that purpose can cause action; thus, Locke began researching the impact goals have on human activity. Locke developed and refined his goal-setting theory in the 1960s, publishing his first article on the subject, "Toward a Theory of Task Motivation and Incentives", in 1968. This article established the positive relationship between clearly identified goals and performance.
Goals that are difficult to achieve and specific tend to increase performance more than goals that are not. A goal can be made more specific by:
- quantification (that is, making it measurable), such as by pursuing "increase productivity by 50%" instead of "increase productivity",
- enumeration, such as by defining tasks that must be completed to achieve the goal instead of only defining the goal.
Setting goals can affect outcomes in four ways:
- Goals may narrow someone's attention and direct their efforts toward goal-relevant activities and fromward goal-irrelevant actions.
- Goals may make someone more effortful. For example, if someone usually produces 4 widgets per hour but wants to produce 6 widgets per hour, then they may work harder to produce more widgets than without that goal.
- Goals may make someone more willing to work through setbacks.
- Goals may cause someone to develop and change their behavior.
People perform better when they are committed to achieving certain goals. Through an understanding of the effect of goal setting on individual performance, organizations are able to use goal setting to benefit organizational performance.  In addition, another aspect that goes with goal commitment is also goal acceptance. This is an individuals willingness to pursue their specific goal.  Locke and Latham (2002) have indicated three moderators that indicate goal setting success:
- The importance of the expected outcomes of goal attainment,
- Self-efficacy: one's belief that they are able to achieve the goals,
- Commitment to others: promises or engagements to others can strongly improve commitment.
Expanding the three from above, the level of commitment is influenced by external factors. Such as the person assigning the goal, setting the standard for the person to achieve/perform. This influences the level of commitment by how compliant the individual is with the one assigning the goal. An external factor can also be the role models of the individual. For example, say an individual looks up to their manager and cares about his or her opinion, the individual is more likely to listen to goal-setting strategies from that individual, and ultimately become more committed to their desired goal. 
Internal factors can derive from their participation level in the work to achieve the goal. What they expect from themselves can either flourish their success, or destroy it. Also, the individual may want to appear superior to their peers or competitors. They want to achieve the goal the best and be known for it. The self-reward of accomplishing a goal, is usually one of the main keys that keep individuals committed. For example, if an individual was working toward becoming the president of their company, if they achieve their goal, they could reward themselves with something of importance to them. 
Another route individuals can take to set their goals is to follow (STD) that is, setting their goals to be Specific, Time-bound, and difficult. Specifically, an individuals goal should be set at the 90th percentile of difficulty. 
Locke and colleagues (1981) examined the behavioral effects of goal-setting, concluding that 90% of laboratory and field studies involving specific and challenging goals led to higher performance than did easy or no goals. This is because if an individual is intrinsically motivated by a goal, he or she will want to conquer the goal to receive internal rewards, and will be satisfied because of it.
Locke and Latham (2006) argue that it is not sufficient to urge employees to "do their best". "Doing one's best" has no external referent, which makes it useless in eliciting specific behavior. To elicit some specific form of behavior from another person, it is important that this person has a clear view of what is expected from him/her. A goal is thereby of vital importance because it helps an individual to focus his or her efforts in a specified direction. In other words, goals canalize behavior. (However, when faced with complex tasks and directions that are difficult to specify, telling someone to "do their best", with a focus on learning, can sometimes lead to the discovery of better strategies whereby specific goals can then be set.:707)
Goal setting can lead to creation of feedback loops, either negative or positive comparison of the output to the goal. Negative feedback loops lead to increasing the input associated with goal attainment to improve output in the next loop cycle. Positive feedback loops if not sufficiently reinforced can lead to subsequent setting of goals at a less difficult level.
Without proper feedback channels it is impossible for employees to adapt or adjust to the required behavior. Managers should keep track of performance to allow employees to see how effective they have been in attaining their goals. Providing feedback on short-term objectives helps to sustain motivation and commitment to the goal. There are two forms of feedback in which the employee can receive (Outcome and Process feedback). Outcome feedback is after the goal or activity is finished, and process feedback is during the completion of a goal. Feedback should be provided on the strategies followed to achieve the goals and on the final outcomes achieved.
Honing goal setting using temporal motivation theory
Locke and Latham (2004) note that goal setting theory lacks "the issue of time perspective". Taking this into consideration, Steel and Konig (2006) utilize their temporal motivation theory (TMT) to account for goal setting's effects, and suggest new hypotheses regarding a pair of its moderators: goal difficulty and proximity. The effectiveness of goal setting can be explained by two aspects of TMT: the principle of diminishing returns and temporal discounting. Similar to the expression "the sum of the parts can be greater than the whole", a division of a project into several, immediate, subgoals appears to take advantage of these two elements.
The more employees are motivated, the more they are stimulated and interested in accepting goals. These success factors are interdependent. For example, the expected outcomes of goals are positively influenced when employees are involved in the goal setting process. Not only does participation increase commitment in attaining the goals that are set, participation influences self-efficacy as well. Additionally, feedback is necessary to monitor one's progress. When feedback is not present, an employee might think they are not making enough progress. This can reduce self-efficacy and thereby harm the performance outcomes in the long run.
- Goal-commitment, the most influential moderator, becomes especially important when dealing with difficult or complex goals. If people lack commitment to goals, they lack motivation to reach them. To commit to a goal, one must believe in its importance or significance.
- Attainability: individuals must also believe that they can attain—or at least partially reach—a defined goal. If they think no chance exists of reaching a goal, they may not even try.
- Self-efficacy: the higher someone's self-efficacy regarding a certain task, the more likely they will set higher goals, and the more persistence they will show in achieving them.
In business, goal setting encourages participants to put in substantial effort. Also, because every member has defined expectations for their role, little room is left for inadequate, marginal effort to go unnoticed.
Managers cannot constantly drive motivation, or keep track of an employee's work on a continuous basis. Goals are therefore an important tool for managers, since goals have the ability to function as a self-regulatory mechanism that helps employees prioritize tasks.
Four mechanisms through which goal setting can affect individual performance are:
- Goals focus attention toward goal-relevant activities and away from goal-irrelevant activities.
- Goals serve as an energizer: Higher goals induce greater effort, while low goals induce lesser effort.
- Goals affect persistence; constraints with regard to resources affect work pace.
- Goals activate cognitive knowledge and strategies that help employees cope with the situation at hand.
Goal setting is used to improve training outcomes. For example, Tomokazu Kishiki and colleagues performed a randomized controlled trial on surgical trainees to determine whether or not their participation in a goal-setting program would improve performance and testing scores; the addition of achievable goals appeared to be beneficial to the trainees.</ref> When goal setting is applied optimally during training processes, both employee motivation and organizational commitment can increase.
In personal life
Common personal goals include losing weight, achieving good grades, and saving money. The strategy for goal setting begins with the big picture; taking a look at the big picture before breaking it into smaller components allows one to focus on the primary goal. Once the main goal is set, breaking it up into smaller, more achievable components helps in the planning portion of setting the goal. These smaller, more obtainable objectives promote self-esteem and provide instant feedback to keep the individual on task.
Time management is the practice of systematically finishing tasks assigned by superiors or one's self in an efficient and timely manner. Time management steps require identifying the objective and laying out a plan that maximizes efficiency and execution of the objective. There are many useful mobile apps that help with personal goal setting; some of the categories include budgeting, wellness, calendar and productivity apps.
The book What They Don't Teach You in the Harvard Business School is known for citing a study which found that written goals have a significant effect on financial success, but in 1996 Fast Company determined that this study did not occur. In 2015, a research study on goals found those who wrote them down accomplished them at a significantly higher rate than those who did not.
Goal-setting has limitations. In an organization, a goal of a manager may not align with the goals of the organization as a whole. In such cases, the goals of an individual may come into direct conflict with the employing organization. Without clearly aligning goals between the organization and the individual, overall performance may suffer. Additionally, there is evidence that suggests that goal-setting can foster unethical behavior when people do not achieve their desired goals. Goal setting also may impair performance in certain situations. Such situations include when an individual becomes overly focused on accomplishing a previously-set goal that they end up underperforming on current tasks.
Goal setting may have the drawback of inhibiting implicit learning: goal setting may encourage simple focus on an outcome without openness to exploration, understanding, or growth. A solution to this limitation is to set learning goals as well as performance goals, so that learning is expected as part of the process of reaching goals.
Developments in theory
Self-efficacy, past performance, and various other social factors influence goal setting. Failure to meet previous goals often leads to setting lower (and more likely achievable) goals.
There are times when having specific goals is not a best option; this is the case when the goal requires new skills or knowledge. Tunnel vision is a consequence of specific goals; if a person is too focused on attaining a specific goal, he or she may ignore the need to learn new skills or acquire new information. This concept is illustrated well by the "basketball game task" study in which observers watched a video of a group of people wearing white shirts and black shirts who are passing a basketball back and forth, and the observers were instructed to count the number of times a basketball is passed between only the players wearing white shirts. During the video, a woman carrying an open umbrella walks across the screen. Of 28 observers who were focused on counting the number of passes between only the players wearing white shirts, only 6 reported noticing the woman carrying the umbrella. When observers watched the video without focusing on a specific task, all of the observers noticed the umbrella woman. In situations where the risk of tunnel vision is high, the best option is to set a learning goal. A learning goal is a generalized goal to achieve knowledge in a certain topic or field, but it can ultimately lead to better performance in specific goals related to the learning goals.
Locke and Latham (2006) attribute this response to metacognition. They believe that "a learning goal facilitates or enhances metacognition—namely, planning, monitoring, and evaluating progress toward goal attainment". This is necessary in environments with little or no guidance and structure. Although jobs typically have set goals, individual goals and achievement can benefit from metacognition.
Framing, or how goals are viewed, influences performance. When one feels threatened and or intimidated by a high goal they perform poorer than those who view the goal as a challenge. The framing of a goal as a gain or a loss influences one's eventual performance.
Realization of goals has an effect on affect—that is, feelings of success and satisfaction. Achieving goals has a positive effect, and failing to meet goals has negative consequences. However, the effect of goals is not exclusive to one realm. Success in one's job can compensate for feelings of failure in one's personal life.
The relationship between group goals and individual goals influences group performance; when goals are compatible there is a positive effect, but when goals are incompatible the effects can be detrimental to the group's performance. There is another factor at work in groups, and that is the sharing factor; a positive correlation exists between sharing information within the group and group performance. In the case of group goals, feedback needs to be related to the group, not individuals, in order for it to improve the group's performance.
Goal concordance (agreement) among members of groups as well as concordance across hierarchies in organizations has positive performance impacts. Research evaluating affects of goals on employee commitment found an indirect relationship mediated by employee perception of organizational support, suggesting that leaders to directly support goal setting by individual employees.
Goals and traits
Learning goals involve tasks where skills and knowledge can be acquired, whereas performance goals involve easy-to-accomplish tasks that will make one appear successful (thus tasks where error and judgment may be possible are avoided).
A more complex trait-mediation study is the one conducted by Lee, Sheldon, and Turban (2003), which yielded the following results:
- Amotivated orientation (low confidence in one's capabilities) is associated with goal-avoidance motivation, and more generally, associated with lower goals levels and lower performance.
- Control orientation (extrinsic motivation) is associated with both avoidance and approach goals. Approach goals are associated with higher goal levels and higher performance.
- Autonomy goals (intrinsic motivation) leads to mastery goals, enhanced focus, and therefore enhanced performance.
Macro-level goals refer to goal setting that is applied to the company as a whole. Cooperative goals reduce the negative feelings that occur as a result of alliances and the formation of groups. The most common parties involved are the company and its suppliers. The three motivators for macro-level goals are: self-efficacy, growth goals, and organizational vision.
General action and inaction goals
Action goals are believed to promote the sense of action, whereas inaction goals are considered to reduce people's tendency to take actions. Common action goals can be to do something, perform a certain act, or to go someplace, whereas typical inaction goals can take the form of having a rest or to stop doing something.
Goal-regulated overall activity and inactivity tendency result from both biological conditions and social-cultural environment.[page needed] Recent research revealed that most nations hold more favorable attitude towards action rather than inaction, even though some countries value action and inaction slightly differently than others.
Recent research suggested that people tend to choose inaction goals when they are making decisions among choices where uncertainty could result in negative outcomes, but they prefer action over inaction in their daily behaviors when no deliberation is needed. Timothy D. Wilson and colleagues found that many people "preferred to administer electric shocks to themselves instead of being left alone with their thoughts".
- Grant, Anthony M. (September 2012). "An integrated model of goal-focused coaching: an evidence-based framework for teaching and practice" (PDF). International Coaching Psychology Review. 7 (2): 146–165 (149). Archived from the original (PDF) on 2014-11-29.
Goal setting should be done in such a way as to facilitate the development and implementation of an action plan. The action plan should be designed to motivate the individual into action, and should also incorporate means of monitoring and evaluating performance thus providing information on which to base follow-up coaching sessions.
- Grant, Anthony M. (September 2012). "An integrated model of goal-focused coaching: an evidence-based framework for teaching and practice" (PDF). International Coaching Psychology Review. 7 (2): 146–165 (147). Archived from the original (PDF) on 2014-11-29.
Whilst the ideas represented by the acronym SMART are indeed broadly supported by goal theory (e.g. Locke, 1996), and the acronym SMART may well be useful in some instances in coaching practice, I think that the widespread belief that goals are synonymous with SMART action plans has done much to stifle the development of a more sophisticated understanding and use of goal theory within in the coaching community, and this point has important implications for coaching research, teaching and practice.
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Goal-setting theory (Locke & Latham, 1990, 2002) was developed inductively within industrial/organizational (I/O) psychology over a 25-year period, based on some 400 laboratory and field studies. These studies showed that specific, high (hard) goals lead to a higher level of task performance than do easy goals or vague, abstract goals such as the exhortation to 'do one's best'. So long as a person is committed to the goal, has the requisite ability to attain it, and does not have conflicting goals, there is a positive, linear relationship between goal difficulty and task performance. Because goals refer to future valued outcomes, the setting of goals is first and foremost a discrepancy-creating process. It implies discontent with one's present condition and the desire to attain an object or outcome.
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- Goal-setting theory might define self-efficacy as an impression that one has the capability of performing in a certain manner or of attaining certain goals. Or one could define self-efficacy as a belief that one has the capabilities to execute the courses of actions required to manage prospective situations. Unlike efficacy (defined as the power to produce an effect—in essence, competence), self-efficacy consists of the belief (whether or not accurate) that one has the power to produce that effect. For example, a person with high self-efficacy may engage in more health-related activity when an illness occurs, whereas a person with low self efficacy may succumb to feelings of hopelessness. (Compare: Sue, David; Sue, Derald Wing; Sue, Stanley; Sue, Diane (2015). Understanding abnormal behavior (11th ed.). Belmont, CA: Wadsworth/Cengage Learning. p. 194. ISBN 9781305537606.) Note the distinction between self-esteem and self-efficacy. Self-esteem in this context relates to a person's sense of self-worth, whereas self-efficacy relates to a person's perception of their ability to reach a goal. For example, take the case of an incompetent rock-climber. Though probably afflicted with poor self-efficacy in regard to rock climbing, this hypothetical person could retain their self-esteem unaffected.
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[...] people with unmet goals were more likely to engage in unethical behavior than people attempting to do their best. This relationship held for goals both with and without economic incentives. We also found that the relationship between goal setting and unethical behavior was particularly strong when people fell just short of reaching their goals.
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Learning goals (sometimes referred to as mastery goals) focus the coachee's attention on the learning associated with task mastery, rather than on the performance of the task itself. An example of a learning goal in executive or workplace coaching might be 'learn how to be the best lawyer in my area of practice'. Learning goals tend to be associated with a range of positive cognitive and emotional processes including perception of a complex task as a positive challenge rather than a threat, greater absorption in the actual task performance (Deci & Ryan, 2002), and enhanced memory and well-being (Linnenbrink, Ryan & Pintrich, 1999). Furthermore, individual performance can be enhanced in highly complex or challenging situations when team goals are primarily framed as being learning goals, and the use of team-level learning goals can foster enhanced co-operation between team members (Kristof-Brown & Stevens, 2001). One benefit of setting learning goals is that they tend to be associated with higher levels of intrinsic motivation which in turn is associated with performance (Sarrazin et al., 2002).
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