Goodhart's Law

Goodhart's Law: Once a measure has been turned into a target it ceases to be a good measure.

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There are two popular stories to illustrate Goodhart's Law and they are easily found with a quick google search but I will sum them up here quickly. 

In a city there was a large rat problem so the government decided that they would reward citizens for rat tails. The end result was that people started breeding rats and cutting off their tails which ended up increasing the rat population in the city rather than decreasing it.

The cobra story is similar in that there was a city with a cobra problem and the government decided to pay citizens for dead cobras which led to the citizens breeding cobras. Once the government found out they stopped paying for dead cobras and the citizens who were breeding the cobras released them increasing the cobra population and adding to the problem. 

The idea is simple and yet in practice it seems to completely avoid people's detection. The most common application that I see of this in business is tracking people's hours. It is so interesting to me that boss will look at an employee's 40 hour work week and think they got their money's worth because the employee "worked hard" and the employee can put in 40 hours and feel like they got the pay they deserved because they "worked hard" yet there has been no measurement made of whether or not those 40 hours brought in enough money or value for the boss to break even. It is easy and it is tradition to measure hours for compensation but the measurement is terrible. We are measuring time in and money out but time in does not equal money out. 

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Leadership Lesson

The issue is pretty wide spread. Pretty much anywhere you use a K.P.I. Goodhart's Law is going to creep in over time. One of the easiest ways to combat this is to change your K.P.I.s regularly which is what a lot of people do intuitively. It isn't always the best way though. The "best" way is going to differ based on your situation but I find that one of the best ways to reach your goals is to move the focus off measurements and back onto the goal. It is more subjective but if people are focused on the goal they tend to move towards it better.