Metric

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When everything about a people is for the time growing weak and ineffective, it begins to talk about efficiency. ... Vigorous organisms talk not about their processes, but their aims.

— G. K. Chesterton, Heretics

“When a measure becomes a target, it ceases to be a good measure.”

—Goodhart’s Law

The stock-in-trade of a middle manager and the management consultant she aspires to become.

Like a key performance indicator, a second-order derivative of actual performance calculated to allow non-experts to make cavalier management decisions, usually to reduce expenditure on — aka make redundant — the person performing that function.

To be contrasted with the ineffable, inarticulable skills that are provided by a subject matter expert.

Goodhart’s law

Not a law of economics or sociology so much as a wry remark — professor Goodhart made it at a symposium in 1975 — that, happens to pierce modern management orthodoxy through the heart. Thus it can both spur its own industry of academic work in sociology and systems theory, and at the same time go ignored in the upper tiers of corporate management:

When a measure becomes a target, it ceases to be a good measure.

It is so universal enough to apply even to dolphins. An aquarium in Miami is reported to have dealt with the problem of litter and dead seagulls in the main tank by rewarding dolphins for cleaning them up: a fish for each bird, or piece of litter.

Before long the dolphins were observed breaking up pieces of litter and claiming multiple fish for one each, and then stockpiling surplus fish, luring seagulls with them, and killing the seagulls!

“we should ” as xxx remarked, “bevgrateful dolphins don't have opposable thumbs.”

One could, and here I am indebted to this excellent resource on Goodhart’s law, break the phenomenon down into four types.

• Regressive: using a single metric as a proxy to measure a phenomenon that is actually multivariate — caused by several factors. Here Simpson ’s paradox is not your friend.

• Extremal: Where a the metric is a useful indicator under normal circumstances — Mediocristan, but breaks down in extremes or unusual cases — Extremistan. Paging Messrs Black and Scholes. You know, using normal distributions of independent events to model dependent events, like human behaviour of the market.

• Causal: the old correlation is not the same as causation chestnut.

• Adversarial: Substitute targeting the desired outcome — a senior tranche in a portfolio of mortgages that will not default in any circumstances — with one that is rated AAA. Hello, global financial crisis.

See also

• Outsourcing
• Service level agreement
• Management consultant
• Subject matter expert
• Metrics
• ClauseHub: theory
• Beware of shorthand
• Multivariate factors