(c) Aspiration Levels Through the Balance Sheet. We also became interested in the
question of how pervasive the phenomenon of adaptive aspirations was in the or-
ganization. Perhaps the goals for deposits we chose are an aberration, and most
goals at the organization do not follow an adaptive process. To answer this question,
we decided to follow adaptive goals through the balance sheet by examining those
that pertained to costs, revenues, and overall profitability. The analysis for costs is
reported in Exhibit 26.2, which represents estimation of equation (2) using the log
of annual goals stated in local currency for all cost centers at one of the sites. As
with the analysis of deposits, logs were used to satisfy the distributional assump-
tions of the general linear model. Interestingly, the results for costs indicate that nei-
ther the constant nor the previous aspiration level has a significant effect on the cur-
rent level of aspiration. Rather, it is the log of actual cost performance—that is, the
log of costs actually incurred by each center—that is the best predictor of subse-
quent goals for that cost center. Thus, these goals seem to adapt to performance
without reference to past goals and with an intercept that is not significantly differ-
ent from zero. For revenues, we examined sales of mortgage products at one of the
sites measured in local currency and subjected to a logarithmic transformation, once
again for distributional reasons (Exhibit 26.3). As with the analysis of deposits,
there had been recent transformations at some of the units, and this is reflected in
the coding of a dummy variable to indicated these transitions. For sales, as with de-
26.4 THREE PRELIMINARY ANALYSES 26 • 9Measure:Annual cost center goals for costs, stated in local currency.
Data:95 usable observations were obtained.
Predictor Variable Coefficient
Constant .709
Log of Previous Aspiration Level –.077
Log of Previous Performance Level .975*
p < 0.05 **p < 0.01
Restated Model:
LogGoalt= .709 + .175 LogGoalt–1+ .975 (LogPerft–1– LogGoalt–1)
Exhibit 26.2. Goals for Costs.
Measure:Annual branch goals for mortgage products stated in local currency.
Data:102 usable observations were obtained.
Predictor Variable Coefficient
Constant 1.729*
Log of Previous Aspiration Level .196
Log of Previous Performance Level .389
Branch conversion .167
p < 0.05 p < 0.01
Restated Model:
LogGoalt= 1.729 + .585 LogGoalt–1+ .389 (LogPerft–1– LogGoalt–1) + .167 BrConv
Exhibit 26.3. Goals for Sales.