Goodhart's Law holds that once a measure is turned into a target, people start optimizing the measure, and it stops telling you what you wanted to know.
Where it comes from
British economist Charles Goodhart, then an adviser at the Bank of England, made the point in 1975 about monetary policy: statistical relationships a central bank relies on tend to break down once it tries to steer by them.¹ Anthropologist Marilyn Strathern later gave it the wording most people quote: "When a measure becomes a target, it ceases to be a good measure."² Business supplies the case studies. At Wells Fargo, aggressive cross-selling goals were followed by roughly two million deposit and credit card accounts that may have been opened without customers' authorization, according to the U.S. Consumer Financial Protection Bureau in 2016.³
Where it goes wrong
The law is sometimes used as an argument against measuring anything. Goodhart's point concerns numbers tied to pressure and rewards. Measurement used for learning and honest discussion is a different case, and a valuable one.
Talent Takeaway
Pair every target with a second number that would reveal gaming: sales with complaints, speed with error rates, training hours with what people actually apply. And talk about the numbers with your team more often than you reward them.
¹ Goodhart, C. A. E. (1975). Problems of monetary management: The U.K. experience. In Papers in monetary economics (Vol. 1). Reserve Bank of Australia.
² Strathern, M. (1997). "Improving ratings": Audit in the British university system. European Review, 5(3), 305–321.
³ Consumer Financial Protection Bureau. (2016, September 8). Consumer Financial Protection Bureau fines Wells Fargo $100 million for widespread illegal practice of secretly opening unauthorized accounts [Press release].
Further reading: Muller, J. Z. (2018). The tyranny of metrics. Princeton University Press.