“Goodhart’s Law” comes from a 1975 paper by economist Charles Goodhart. The usual formulation of Goodhart’s Law is

“When a measure becomes a target, it ceases to be a good measure.”

What this means is when the measurement of a goal itself becomes a goal, then people tend optimize towards achievement of the measurement which may not be aligned with the original goal. The measurement of the goal ends up eating the original goal.

Examples:

• A personal story – in 4th grade my teacher had a semester long reading challenge/contest. Her goal likely was for us to become better readers and develop a greater love of reading. I wanted to read the most amount of books so I checked out from the library many short and below-grade-level books in order to be able to read a lot of books and win the challenge. Of course, this action was not in line with the goal of improving my reading or my love of reading as these books were way below my reading level at the time. The measurement – the number of books read – took over the true goal. Fortunately, my teacher caught on to what I was doing and stepped in.

• A primary goal of school is for students to learn information and to develop critical thinking and reasoning skills. Measurement of student learning is measured (among other methods) by standardized tests. Of course, in order to show proficiency and improvement many teachers and schools have shifted to have high test scores as their focus – so the curriculum and teaching is more focused on success at the standardized tests, which is the measurement – not the goal.

• I love this example from a data scientist: “In order to increase revenue, the manager of a customer service call center starts a new policy: rather than being paid an hourly wage, every employee is compensated solely based on the number of calls they make. After the first week, the experiment seems like a resounding success: the call center is processing twice the number of calls per day! The manager, who never bothers to listen to his employees’ conversations as long as their numbers are good, is quite pleased. However, when the boss stops by, she insists on going out to the floor and when she does so, both she and the manager are shocked by what they hear: the employees pick up the phone, issue a series of one word answers, and slam the phone down without waiting for a good-bye. No wonder the number of completed calls has doubled! Without intending to, by judging performance only by the volume of calls, the manager has incentivized employees to value speed over courtesy.”

• A few years back I read of a talented surgeon who was a specialist in a very difficult type of surgery. He was recognized as one of the best in the country based on his very high success rate for the procedure. As a result of his skill this doctor was referred many difficult cases by colleagues. These difficult cases had lower success rates. Not wanting to fall off the list of best surgeons due to lower success rates the surgeon stopped taking difficult cases. The measurement – success at the surgery – ate the probable goal – saving lives.

• From the news in recent years: Wells Fargo brokers had a goal of gaining new business from both new and existing clients. One aspect of measurement was the number of new accounts opened. In order to make more money, many brokers created thousands of unauthorized accounts in order to have success with respect to the measurement – more accounts opened. This of course was illegal.

It is clear from the examples above that companies should be careful about the metrics used to measure goal progression. There is an apropos quote that states “tell me how a man is compensated and I will tell you what he does.” Incentives matter.

Another interesting aspect about Goodhart’s Law is that in absence of clearly articulated goals, we often latch onto whatever measurement is at hand as a substitute for a goal:

• Without clear life goals we may instead choose to focus on what is measurable – money, career success, material possessions, etc.
  
• Similarly, companies without a clear mission may focus on profits and growth as their goals (actually – these are measurements and not good substitutes for underlying purpose and goals).
  
• I read of an interesting example with respect to social media. Most of us have no clear goal with respect to social media. As such, we may focus on metrics such as the number of engagements, likes or shares as the gauge of whether we are having “success” with social media. In reality, these are just measurement metrics, not goals. Worthwhile social media goals might to be to be informed about the news or to keep connection with friends that don’t live nearby (or whatever). Think about how you might approach social media differently with clearly defined goals.

Related IFOD on unintended consequences: The Cobra Effect