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Chapter 1
General Introduction
1.1 The Problem of Goal Alignment
“Organizations are social units deliberately constructed to seek specific goals.”
(Etzioni 1961)
Many scholars have sought to answer the question of what an organization is. Although
a definite and undisputed definition of organizations may never be found, we can at least
acknowledge certain characteristics. As posited by Etzioni (1961), one defining characteristic
of organizations is that they are social entities seeking the realization of specific goals.
These goals are often captured by an organization’s owners and/or top management in
the organization’s vision, mission and strategy. For an organization to successfully pursue
its goals, it is important that all individual members of the organization collaborate on
achieving these goals. However, realizing collaboration is not an easy task. One reason
for this difficulty is that organizations consist of many individuals who have their own
goals as well. This is challenging because the organizational goals often differ from the
goals of its individual members. In other words, collective and individual goals are not
aligned automatically. More importantly, the goals of the individual members of the organization
often conflict directly with organizational goals. For example, it is likely in the
best interest of the organization that its members maximize their efforts to contribute to
the organization’s long-term value. However, an individual employee can have different
goals. He may prefer to reduce his efforts by procrastinating. Additionally, it is possible
that the self-interest seeking employee does not reduce his efforts per se, but repeatedly
strays from organizational goals by, for example, adopting pet projects. Both cases have
similar effects; long-term firm value is not optimized. Such behaviours are undesirable to
the organization’s owner, because they directly hamper the realization of organizational
goals.
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