Goodhart's law states that “When a measure becomes a target, it ceases to be a good measure.” Put another way, when we set a performance measure as a goal or a bar to hit, people and organizations tend to find ways to achieve that measure without regard for whether their performance or production is truly effective, beneficial, or even desirable. Goodhart’s law has to do with unintended consequences.
You can see this law in effect in many workplaces, where time on the job (a measure) is treated as the performance target in lieu of actual productivity or what workers accomplish. This common standard is arguably a consequence of the Industrial Age when the hours spent on certain tasks — such as at a highly regulated factory — might be a reasonable gauge of productivity. Now, with our service economy, that is less likely to be the case although it may have some relevance in certain settings like manufacturing and retail. One need only look at the work-at-home phenomenon driven by the pandemic to see that traditional workplace performance goals may have hindered productivity all along.
How the Soviets Nailed Goodhart’s Law
An extreme and apocryphal example of the unintended consequences associated with Goodhart’s law comes from the Soviet Union. Our tale begins with the Soviet central planners, who, as they were inclined, demanded that factories increase the number of nails they manufacture. The factories then, to meet this demand with little fuss, simply made lots of tiny nails that were of no use. Thus they achieved the numerical goal, but only in practice, not spirit. The planners quickly got wise to this scheme, so they replaced the count-based goal with a weight-based goal. In response the factories started producing just a few giant nails, which were also useless.
I doubt this story is entirely true if at all, but it’s the same thing you see in many workplaces where employees waste their time on trivial tasks (or social media) in order to look busy and eat up the clock. If instead their performance were regulated by multiple criteria, such as task completion and quality contributions, their work lives could be more satisfying and more productive. Nonetheless, we almost universally rely on an artificially and arbitrarily derived goal of working a certain number of hours a week whatever the necessity or consequence.
Goodhart’s Law Goes to School
Our acculturation to this world of unintended consequences begins in school. One obvious example of Goodhart’s law stems from the dominance of the standardized test industry (aka the testing industrial complex). Many teachers are assessed in large part by their students’ performance on these tests, so the game becomes “teach to the test.” In other words, instead of maximizing a teacher’s ability to assure that students are acquiring vital skills — such as the ability to think critically, the development of intellectual curiousity, and the wherewithal to continue learning — teachers are compelled to attend to student knowledge of preset material and to practice sample test questions with little regard to the efficacy of the tests themselves. By the way, standardized testing scandals (a.k.a. cheating) are also predicted by Goodhart’s law.
It’s not just standardized tests, though. Grading of all sorts has a similar effect. When I taught college composition to first-year honors students, I found that many of these elite students — the ones the college was trying to lure because of their superior high school grades — were in fact remedial compared to the general population of students when it came to their aptitude for higher order thinking and their willingness to challenge their assumptions and take risks. Early in their schooling, these honors students had become adept at ascertaining and delivering just what their teachers and the testing industry wanted, with many preferring to play it safe. They found that they were good at merely accumulating and regurgitating knowledge and could rack up high grades while never leaving their comfort zone.
Don’t get me wrong, all of these students were bright, hard-working, and serious-minded, and many were as capable as or more capable than their non-honors peers. But most adhered fervently to the goal of accumulating points rather than challenging their minds, which was not a recipe for success in my classes. I was never popular with the honors students.
Goodhart’s law applies here: since the measure (aka high scores) was the initial and most significant criterion for admission, the students simply had to perform to that measure in as efficient a manner as possible to make the grade. While the honors students were not prone to cheating and in fact prided themselves on their integrity, many of them did, perhaps unwittingly, game the system. The focus on grades and scores as the goal has created a system of unintended consequences (a.k.a. grade grubbing) up and down our educational system and has undermined the true mission of student learning.
Goodhart’s Law at Work
It is similar in the workplace where we offer rewards of various sorts for meeting certain measures, for instance sales goals or snapshots of performance. These reward structures engender unintended negative consequences, including mistrust, team dysfunction, risk aversion, stunted creativity, and lowered productivity, to name a few. I have written about this reality in a different context.
The very practice Goodhart warns against — converting measures into goals — can be so ingrained that its effects become cultural. Within this culture of unintended consequences, organizations assume that because they have rules that are attached to measures, the rules themselves must be sound no matter how misapplied, which is also a manifestation of Bureaucratic Compulsive Disorder or BCD. A likely outcome is that as the unintended consequences mount, the expectations lower. We may meet the measures, but only at the expense of true success, a recipe for mediocrity.
So, what is the reward system in your organization? What are the measures of individual success, and what are the goals? What are the unintended consequences? Does your organization inspire the best from its people or just the most? Does your organization emphasize doing things right while suppressing or even penalizing doing the right thing? If so, your organization may be suffering the effects of Goodhart’s law. And, what will you do with all those Soviet nails?
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Soviet Nails