Goals: How Goals Shape Decisions

Goals shape how decisions are made by influencing information processing, risk preferences, decision complexity, strategy adaptation, and trade-offs between short-term and long-term objectives. If we understand how that can happen, we can design decision governance which helps stabilize or destabilize individual goals, align or misalign them with organizational priorities, as well as influence, among others, what information decision makers focus on, and thus, how they frame the choice they need to make.

This text is part of the series on the design of decision governance. Decision Governance refers to values, principles, practices designed to improve the quality of decisions. Find all texts on decision governance here, including “What is Decision Governance?” here.

Goals Shape Attention and Information Processing

Decision-makers tend to focus on information that is most relevant to their goals, a phenomenon known as goal-directed attention (Shah, Friedman, & Kruglanski, 2002). Goals influence the depth and breadth of information search. When decision-makers pursue well-defined goals, they often engage in narrow, heuristic-driven processing. Conversely, uncertain or conflicting goals lead to broader and more analytical information processing (Larrick, 2016). This principle is evident in various decision-making environments, where a targeted approach to gathering and evaluating information can lead to increased efficiency and improved outcomes. Over time, this focused approach can facilitate innovation by emphasizing the most relevant factors while minimizing distractions.

Goals Affect Risk Preferences

The relationship between goals and risk-taking is well-documented. According to Prospect Theory (Kahneman & Tversky, 1979), decision-makers tend to be risk-averse when pursuing gains but more willing to take risks when trying to avoid losses. Aspiration levels also influence risk-taking. Research by March and Shapira (1992) found that decision-makers take higher risks when their goals seem unattainable through conservative strategies. The commitment to a goal can push individuals toward unconventional or high-risk strategies, particularly when conventional methods appear insufficient to achieve their desired outcome. This suggests that goal-driven decision-making is inherently linked to how risks are assessed and managed.

Goal Conflict Leads to Decision Complexity

When decision-makers face multiple, conflicting goals, they may experience cognitive overload and resort to satisficing—choosing an acceptable rather than optimal solution (Simon, 1955). Goal conflict can also trigger decision inertia, where decision-makers delay action due to uncertainty about which goal to prioritize (Luce, 1998). Situations where individuals or organizations must balance competing priorities often require complex trade-offs, leading to hesitation or shifts in decision-making approaches. The presence of multiple stakeholders, ethical considerations, or external pressures can further exacerbate goal conflicts, making the decision process more intricate and requiring a more structured evaluation of alternatives.

Dynamic and Evolving Goals Alter Decision Strategies

Decision-makers often revise their goals in response to feedback and changing environments (Powell, Lovallo, & Fox, 2011). In escalation of commitment, individuals continue investing in failing decisions due to a strong attachment to original goals (Staw, 1976). Goal adaptation is also a topic in corporate strategy, where organizations adjust performance targets based on competitor benchmarks and past performance (Greve, 2003). As circumstances change, the ability to reassess and modify goals becomes a key competency in decision-making.

Short-Term vs. Long-Term Goals Influence Trade-offs

Short-term financial pressures can lead managers to prioritize immediate gains over long-term strategic benefits, a tendency known as myopic decision-making (Laverty, 1996). Organizations that set explicit long-term goals encourage decision-makers to consider sustainability, innovation, and stakeholder impact rather than just short-term profitability (Bansal & DesJardine, 2014). Effective decision-making requires a balance between addressing immediate concerns and maintaining a broader vision for future stability.

Ethical and Social Goals Modify Decision-Making Heuristics

When goals include very clear and significant ethical considerations, decision-makers tend to adopt deontological (rule-based) reasoning rather than utilitarian (outcome-based) reasoning (Bazerman & Tenbrunsel, 2011). Social responsibility goals lead organizations to weigh stakeholder interests more heavily, altering cost-benefit calculations and influencing corporate strategy (Aguilera et al., 2007). Ethical considerations introduce an additional layer of complexity, as decisions are no longer based solely on economic or operational efficiency but also on broader societal impacts.

References

• Aguilera, R. V., Rupp, D. E., Williams, C. A., & Ganapathi, J. (2007). Putting the S back in corporate social responsibility: A multilevel theory of social change in organizations. Academy of Management Review, 32(3), 836-863.
• Bansal, P., & DesJardine, M. R. (2014). Business sustainability: It is about time. Strategic Organization, 12(1), 70-78.
• Bazerman, M. H., & Tenbrunsel, A. E. (2011). Blind spots: Why we fail to do what’s right and what to do about it. Princeton University Press.
• Greve, H. R. (2003). Organizational learning from performance feedback: A behavioral perspective on innovation and change. Cambridge University Press.
• Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263-292.
• Larrick, R. P. (2016). The social context of decisions. Annual Review of Organizational Psychology and Organizational Behavior, 3, 441-467.
• Laverty, K. J. (1996). Economic “short-termism”: The debate, the unresolved issues, and the implications for management practice and research. Academy of Management Review, 21(3), 825-860.
• Luce, M. F. (1998). Choosing to avoid: Coping with negatively emotion-laden consumer decisions. Journal of Consumer Research, 24(4), 409-433.
• March, J. G., & Shapira, Z. (1992). Variable risk preferences and the focus of attention. Psychological Review, 99(1), 172-183.
• Powell, T. C., Lovallo, D., & Fox, C. R. (2011). Behavioral strategy. Strategic Management Journal, 32(13), 1369-1386.
• Shah, J. Y., Friedman, R., & Kruglanski, A. W. (2002). Forgetting all else: On the antecedents and consequences of goal shielding. Journal of Personality and Social Psychology, 83(6), 1261-1280.
• Simon, H. A. (1955). A behavioral model of rational choice. Quarterly Journal of Economics, 69(1), 99-118.
• Staw, B. M. (1976). Knee-deep in the big muddy: A study of escalating commitment to a chosen course of action. Organizational Behavior and Human Performance, 16(1), 27-44.

Decision Governance

This text is part of the series on the design of decision governance. Other texts on the same topic are linked below. This list expands as I add more texts on decision governance.

Introduction to Decision Governance

1. What is Decision Governance?
2. What Is a High Quality Decision?
3. When is Decision Governance Needed?
4. When is Decision Governance Valuable?
5. How Much Decision Governance Is Enough?
6. Are Easy Options the Likely Choice?
7. Can Decision Governance Be a Source of Competitive Advantage?

Stakeholders of Decision Governance 

1. Who Is Responsible for Decision Governance in a Firm?
2. Who are the Stakeholders of Decision Governance?
3. What Interests Do Stakeholders Have in Decision Governance?
4. What the Organizational Chart Says about Decision Governance

Foundations of Decision Governance

1. How to Spot Decisions in the Wild?
2. When Is It Useful to Reify Decisions?
3. Decision Governance Is Interdisciplinary
4. Individual Decision-Making: Common Models in Economics
5. Group Decision-Making: Common Models in Economics
6. Individual Decision-Making: Common Models in Psychology
7. Group Decision-Making: Common Models in Organizational Theory

Role of Explanations in the Design of Decision Governance

1. Explaining Decisions
2. Simple & Intuitive Models of Decision Explanations
3. Max(Utility) from Variety & Taste
4. Expected Uncertainty to Unexpected Utility
5. Perceptiveness & Experience Shape Rapid Choices

Design of Decision Governance

1. The Design Space for Decision Governance
2. Decision Governance Concepts: Situations, Actions, Commitments and Decisions
3. Decision Governance Concepts: Outcomes to Explanations
4. Slow & Complex Decision Governance and Its Consequences

Design Parameters of Decision Governance

Design parameters of decision governance, or factors that influence decision making and that we can influence through decision governance:

• Factors influencing how an individual selects and processes information
• Factors influencing information the individual can gain access to

Factors influencing how an individual selects and processes information in a decision situation, including which information the individual seeks and selects to use:

1. Psychological factors, which are determined by the individual, including their reaction to other factors:
   1. Attention:
      • Attention Depends on Stimuli & Goals
      • Motivated Reasoning: How To Detect And Mitigate Its Risks
   2. Memory:
      • Selective Memory Can Be Desirable
   3. Mood
   4. Emotions:
      • Emotions Mediate Decisions Always and Everywhere
   5. Temporal Distance:
      • Why Perception of Long Term Outcomes Should Be Influenced First?
   6. Social Distance:
      • Increased Social Distance (Over)Simplifies Explanations
   7. Expectations
   8. Uncertainty
   9. Attitude
   10. Values
   11. Goals:
       • Goals: How Goals Shape Decisions
       • Goals: How Goals Form and Change
       • Goals: Factors That Stabilize and Destabilize Goals
       • Goals: Factors Influencing Goal Selection
       • Goals: How to Improve Alignment to a Team Goal
   12. Preferences
   13. Competence
2. Social factors, which are determined by relationships with others:
   1. Impressions Of Others: How They Influence Decisions And How To Regulate Them
   2. Reputation
   3. Social Hierarchies:
      • Social Hierarchies: Why They Matter for Decision Governance
      • Social Hierarchies: Benefits and Limitations in Decision Processes
      • Social Hierarchies: How They Form and Change 
      • Power: Influence on Decision Making and Its Risks
      • Power: Relationship to Psychological Factors in Decision Making
      • Power: Sources of Legitimacy and Implications for Decision Authority
      • Power: Stability and Destabilization of Legitimacy

Factors influencing information the individual can gain access to in a decision situation, and the perception of possible actions the individual can take, and how they can perform these actions:

• Governance factors, which are rules applicable in the given decision situation:
  1. Incentives
     • Incentives: Components of Incentive Mechanisms
     • Incentives: Example of a Common Incentive Mechanism
     • Incentives: Building Out An Incentive Mechanism From Scratch
  2. Rules
     • Rules-in-use
     • Rules-in-form
  3. Institutions
• Technological factors, or tools which influence how information is represented and accessed, among others, and how communication can be done
• Environmental factors, or the physical environment, humans and other organisms that the individual must and can interact with
  1. Detail: Level of Detail Can Influence Probability Estimates

Change of Decision Governance

1. Public Policy and Decision Governance:
   • What is the Role of Public Policy in Decision Governance?
   • Dynamics of Public Policy Development
   • How Does Public Policy Influence Decision-Making?
2. Compliance to Policies:
   • Adapting a Decision Process to Comply with a Policy
   • How a Decision Process Can Create Evidence of Compliance
3. Transformation of Decision Governance
   • Punctuated Equilibrium: How to know if a Decision Process is ready for disruption
   • Policy Windows: What They Are And When They Occur
4. Mechanisms for the Change of Decision Governance
   • Incrementalism: What it is, and when/how to implement it in decision governance
   • Governance Dynamics: Change Driven by Cases and Principles
   • Governance Dynamics: Case-Based Development of Decision Governance