ABSTRACT
The purpose of this chapter is to estimate the practical (i.e., economic) value of goal setting to employers by applying standard accepted utility analysis procedures (e.g., Hunter & Schmidt, 1982; 1983; Schmidt, Hunter, & Pearlman, 1982 ; Schmidt, Hunter, McKenzie, & Muldrow, 1979 ; Hunter, Schmidt, & Judiesch, 1990 ) to the available evidence showing the effect of goal setting in increasing job performance. This effect is the difference between “do your best” or no-goal conditions (i.e., the control condition) and the setting of specifi c, diffi cult goals. Economic value is expressed in two metrics: dollar value and percent increase in output. The dollar value metric is the dollar value as sold of the increase in output due to adoption of goal setting. That is, the dollar value fi gures represent increases in revenue from improved performance, not increases in profi t. The percentage metric is the average percentage increase in output produced under goal setting conditions as compared to the baseline in the control condition. It has repeatedly been found that percentage increases in output that appear modest to some (e.g., 9%) correspond to very large fi gures in the dollar value metric ( Hunter, Schmidt, & Judiesch, 1990 ). As we will see later, that is also the case for goal setting. The process of determining practical or economic value is called utility analysis.
