Goodhard’t law is a good example of why we say management is an art. Many of you won’t be familiar with this, but you should. The law says . . .
When a measure becomes a target, it ceases to be a good measure.
Goodhardt’s law speaks to the tendency of people to optimize around a measurement. A “measure” is anything that you track, such as what percentage of folks worked from home today. A target is a goal attached to that measurement, such as 50%. Post that as a graph on the wall, and people will spontaneously start working from the office.
Goodhardt’s law has two applications when manageing people. The first is manipulative: by measuring desired behavior, we end up game-ifying it and create a positive feedback loop. I use manipulative in a non-judgemental sense - there are times when we want to encourage virtuous behavior. Examples here might include drivers wearing seatbelts, or days without an accident.
Of course, Goodhardt’s law can be mis-used in this way as well. There are many examples of businesspeople operating in unwise ways to meet this kind of metric. For instance, a bank might track loan originations which might discourage scrutiny of borrowers. This behavior is commonly called “gaming the system” because it rewards people for outcomes that may not add value.
The Volkswagen emissions scandal is an example of this behavior. The measurement - tailpipe pollution - was made a target and VW ended up optimizing their cars for the test rig and not for real-world driving. Anotehr example is the sub-prime mortgage crisis (see: 2008).
The second use of Goodhardt’s law is not seeking to change behavior. If you want to know about a behavior without influencing behavior, don’t make it a target. Using the bank example, the bank might track originations and use that data to identify successful practices that can be retaught.
Goodhardt’s law can be used for good, for evil, or for insight. It plays off the social dynamics of defining success. Think about the cashiers and waiters that ask for a “5” on a feedback form - what exactly is that data telling their managers? In IT, many organizations use Key Performance Indicators (KPIs) to optimize performance. Goodhardt’s law advises caution and thought before rolling out that kind of program.