【The Trap of Goodhart's Law】Numerical Targets Destroy "Reform"
How "Numerical Targets" in "Reform" Kill Organizations
In business and government, when carrying out "reform," it has become an absolute rule to formulate a "plan" and incorporate "numerical targets" such as KPIs.
While the "numerical targets" presented in this way may look intelligent and plausible, they cause dysfunction on the front lines.
In the first place, "numerical targets" are merely "tools for observing the current situation."
However, once they are presented, they transform into "quotas that must be achieved."
And so, people forget the original purpose of the "reform" and begin to pour all their energy solely into achieving the "numerical targets."
The Impossible Demand of "Quantification" at Any Cost
The "plans" formulated in conjunction with "reform" always require the setting of "numerical targets."
However, setting these "numerical targets" is actually extremely difficult.
To begin with, truly valuable "reform" includes many "qualitative elements" that do not lend themselves to quantification.
For example:
Improvement of business workflows (whether work flows accurately and smoothly)
Transfer of veteran worker skills (how to pass on tacit knowledge that cannot be put into words)
Effective development of young employees (how to bring out the motivation of young staff)
Fostering compliance awareness (how to raise internal ethical standards)
and so on.
However, a "plan" to advance "reform" will not be approved unless it contains some kind of "number."
When that happens, one is forced to come up with "numerical targets" that the management team will like.
For "business workflow improvement," it might be "the number of reductions in rework and resubmissions"
For "transfer of veteran worker skills," it might be "the accuracy of near-miss detection"
For "effective development of young employees," it might be "the turnover rate of employees within 3 years of joining"
For "fostering compliance awareness," it might be "the number of internal consultations and reports"
something like that.
What do you think? Doesn't it feel terribly empty and trivial?
Yet, the modern business scene is overflowing with these kinds of "contrived numbers."
"Numerical targets" begin to take on a life of their own
The moment a numerical target is set, it begins to take on a life of its own.
The essential discussion of "how to improve the workflow" disappears somewhere, replaced by the trivial discussion of how to reduce the count of "rework and resubmissions".
Instead of "how to convey technology," the focus shifts to how to adjust the "number of near-misses" on reports.
In an organization where achieving "numerical targets" has become the goal, those who rack their brains to "make the numbers add up" rather than focusing on "essential improvement" are, ironically, evaluated as "excellent."
The Trap of Goodhart's Law
This situation is "Goodhart's Law."
In short, Goodhart's Law refers to the phenomenon where "the moment a measure is set as a target, it ceases to be a good measure."
Goodhart's Law
A law proposed by economist Charles Goodhart, which states that "the moment a measure is established, the connection between that measure and the original purpose disappears."
Originally, "numerical targets" were a "yardstick" for measuring progress.
However, the moment the achievement of those "numerical targets" is linked to evaluation, the front lines abandon the "original purpose" and prioritize "making the numbers look good" above all else.
As a result, the management team receives glowing reports of "target achievement," and while it appears that "reform" is proceeding according to "plan," behind the scenes, the very reforms that truly need to be accomplished are not progressing at all.
The true nature of this absurd structure, where "numerical success hides essential failure," is Goodhart's Law—the state where the "numerical target," which was meant to be a yardstick, has transformed into a "shackle" that binds the front lines.
Numerical "achievement" invites the "death" of reform
In "reform," setting and pursuing "numerical targets" can sometimes be the greatest "poison."
The moment a "numerical target," which should have been a "yardstick" for measuring the current situation, is replaced by a "quota to be achieved," the organization falls into the trap of Goodhart's Law.
When the front lines abandon essential "reform" and begin to scramble to "create an alibi" to make the numbers add up, the management team receives false reports of success according to the "plan."
However, behind those flashy numbers, the original purpose of the "reform" quietly dies, and the organization is eroded by an unprecedented level of dysfunction.
True "reform" is not about stacking up illusory numbers.
It is about looking at the "feel of the front lines" and "sincere processes" that cannot be quantified, being freed from the shackles of numbers, and "truly moving forward"—that is true "reform."
Have you ever felt a sense of emptiness while reporting figures, thinking, 'These numbers are actually meaningless'? If you have any real-world examples of 'Goodhart's Law' occurring in your workplace, please share them in the comments section.