In his Harvard Business School working paper, Max Bazerman argues that:
“The harmful side effects of goal setting are far more serious and systematic than prior work has acknowledged.
Goal setting harms organizations in systematic and predictable ways. The use of goal setting can degrade employee performance, shift focus away from important but non-specified goals, harm interpersonal relationships, corrode organizational culture, and motivate risky and unethical behaviors.
In many situations, the damaging effects of goal setting outweigh its benefits.”
Sales and Marketing goals, in particular, often produce harmful side effects as evidenced by the following cases:
The first case describes a damaging retail practice of “walking” customers, who are considered unlikely to buy add-ons, out of the store empty-handed to facilitate meeting a prescribed “market basket” goal:
“With the ever-present risk of bringing down a store’s Market Basket average, several employees said, upper management instructs store management that staffers who think they won’t be able sell $200 worth of add-ons should tell the customer the computer is not in stock
“It’s called ‘walking the customer,’ because we let them leave the store empty-handed.” said Ms. Shah, who works in a Staples store in Fountain Valley, Calif.”
The second case outlines how sales goals [quotas] can actually reduce profits by producing certain counter-productive gaming behaviors:
“While [sales] commissions may spur effort in unequivocal ways, the quota […] can sometimes result in agents gaming the system. “Those who have already made the quota in a current compensation cycle may have an incentive to postpone additional sales,” says Nair. “Alternatively, those who perceive they have no chance of making the quota in the current cycle have a perverse incentive to postpone their effort to the next cycle.”
For a third such case see: When Persistence Backfires
In any case, managers should systematically anticipate, discover and counter-measure the harmful side effects of goal setting.
Unconventional Wisdom on Customer Strategy and Innovation 
Great post Arie. Came across a compensation benchmark paper today which showed 76% of companies pay sales and sales manager on a single measure (revenue). This really bubbles up the issues around motivation and true incentives as all trends are showing sales productivity is dropping almost everywhere , plus doing what’s right for the customer vs what’s right for the salesperson’s pocketbook. For the most part we still treat sales as a coin operated function, expecting different results by tweaking quotas and commission rates.