Whether it’s government administration or corporate strategy, it’s invariably only a matter of time until the subject of performance targets rears its head. From market share to how quickly you get seen in the emergency department, we have a target for that. The irony, though, is that setting a target can actually make is less likely that we’ll achieve what we want to achieve, rather than more. It’s the law, in fact: Goodhart’s law.
Goodhart’s law was proposed by the economist Charles Goodhart. It started as a commentary on Thatcher-era monetary policy, but in its current form looks at measuring performance in a broader context:
When a measure becomes a target, it ceases to be a good measure.
This is because while performance measures measure performance, when you set a target you inevitably start to influence performance.
Let’s say, for example, that you ask me to make house calls on vulnerable people, to make sure they’re well and that they have enough to eat, etc. So I do just that, having a nice chat with each person, arranging support where it’s required and perhaps helping out with the occasional household chore. I might get around 20 or so people in a day and everyone would be happy.
You decide, though, that you want to be able to manage my performance more effectively. You set me a target of 25 house calls a day and make it very clear that your assessment of my performance will be based entirely on whether or not I hit this target.
Being a rational individual, and keen to meet my target, I speed up my house calls. I knock on the door, have a brief conversation and move on. No time to chat or to show anyone how Zoom works, I’m afraid. And a problem’s going to have to be pretty serious before I take the extra few minutes to arrange any additional support.
But I meet my target. And everyone’s happy.
Except, of course, they’re not really happy. Or, at least, they won’t be for long. Because while I’m meeting my target in terms of the quantity of house calls I make, the quality of those calls has fallen dramatically. I’m no longer doing what you actually wanted me to do.
It is entirely possible to hit the target without actually achieving the desired result. And this is exactly what Goodhart’s law is getting at.
If you set a target, it is human nature to optimise one’s behaviour so as to achieve that target. Regardless of any knock-on effect elsewhere.
If you run a car sales business, for example, and you tell your sales people that they each have to sell thirty cars a month, you only have yourself to blame when they sell them at a knock-down price that eats into your profit.
Or if you run a university department and you tell your teaching staff that they’ll be judged on student satisfaction scores, do you really have a leg to stand on when nobody wants to teach the third-year module on advanced calculus that all the students hate?
A target is a proxy for what you want to happen. But it is also, necessarily, a simplification of the situation at hand.
In reality, anything we do is going to involve a complicated mix of things that can be measured quantitatively and things that cannot. As well as a high degree of interaction between many of these things.
By all means, make use of performance measures. Where things that are important to us can be measured, it makes sense to measure them. But when you feel the urge to start setting targets, remember Goodhart’s law.