When the British colonised India they were concerned about the number of deadly Cobras in Delhi.
The local council introduced a cash reward for all dead Cobras brought to the authorities.
It wasn’t long before dead Cobras were being delivered in their masses.
The number of Cobra sightings reduced, but the dead snakes continued to be handed in for the cash reward.
This roused the suspicions of the authorities, and they began to investigate.
They found that the local people had started to breed Cobras as an easy revenue source.
The local councils stopped the cash reward and the breeders released all of their Cobras into the wild….the Cobra issue in Delhi became more of a problem than it was before the reward scheme was introduced.
This is just one example of leadership attempting to solve complicated issues with simple incentives resulting in a less than favourable outcome. There are many throughout history: The Hanoi rat bounty, Prohibition in the USA, The Temperance movement in Ireland and The Georgia pig bounty to name a few.
People will always find a way to game the system.
Charles Goodhart, a British economist born in 1936, was a member of the Bank of England’s Monetary Policy Committee and professor at the London School of Economics.
In 1975 Goodhart wrote an article criticising the UKs monetary policy, within the article he wrote…
"When a measure becomes a target, it ceases to be a good measure"
Other academics had similar insights at the time. Jerome Ravetz's 1971 book ‘Scientific Knowledge and Its Social Problems’. Here Ravetz discusses how systems in general can be gamed, focussing on cases where the goals of a task are complex, sophisticated, or subtle. In such cases, the persons possessing the skills to execute the tasks properly seek their own goals to the detriment of the assigned tasks.
Goodhart’s Law says that when a measure becomes a target, it ceases to be a good measure.
The original formulation of Goodhart, made in 1975, was:
“Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes”.
We see this daily in B2B business.
I used to work in Health and Safety in the Offshore Drilling industry. The core principle of any Health and Safety function is to provide people with the knowledge, education, equipment, a culture and environment that allows them to stay healthy and safe in their workplace but, like many other functions in business, it drifted into a numbers game.
I remember we used a Safety observation programme where the crew were incentivised to write cards to log their Safety interventions.
One day I was asked by a Chief engineer to go to his office and collect some keys from his desk. In the top drawer was a collection of Safety observation cards, written out and future dated...all completed for the 3 weeks ahead.
When I asked him about it, he said “I’m just doing what they want, getting the numbers in…”.
"When a measure becomes a target, it ceases to be a good measure"
The first thing we all used to see when we landed on a drilling rig was a huge sign telling us how many LTA free days they were running at. They were on the helipads, in the galleys, they were everywhere…"Proud to be (insert number) days LTA free".
The crew and the management team were incentivised on this number – big number good, low number bad.
Nobody wanted to be the one to kill the bonus for the crew so many injuries were unreported. The more the number increased the more pressure there was to keep it going higher.
Then there all of the ridiculous, futile debates with the management team on how “we could say the guy was on a break when he fell and broke his arm and then technically, he wasn’t on shift, so it wasn’t and LTA….”.
"When a measure becomes a target, it ceases to be a good measure"
We see it in Sales and Marketing every day.
Marketing’s role is to create demand for products and services.
Sales role is to convert that demand into profitable orders.
Yes, there is more nuance to this in each area but when you boil it all the way down, this is it.
Since the 1920s when broadcast advertising was invented, this too has slowly become twisted into a numbers game.
We hear Marketing specialists telling us “our job is all about data” and we see Sales targets creating an environment where the ‘act of doing a range of things’ is the win…
These days, when I hear 'Data Driven Sales' or 'Data Driven Marketing', it sets my spine tingling...
We meet clients who have been sold automated marketing technology that produces them a series of numbers at the end of each month.
- Website hits
- Clicks
- Impressions
- Email lists
- Automated social media posting tools
The numbers look great, and the management team are hypnotised by increasing number “they are going up so that must be good…”.
So what...?
Sales being measured on calls, emails and number of meetings...
So what...?
There are many infamous stories in the history books about the misalignment of targets in sales. One that spring to mind is the sales leader who decided to stop order bonusses and instead incentivised the sales team on number of calls made.
The number of calls went up and more bonusses were paid out.
One day the sales leader walked out to the sales floor and heard a series of very short and abrupt calls being made, often ending with the salesperson hanging up and instantly and redialling.
I remember the first month with a new company, I attended a big industry event where they had a big, expensive stand. I noticed a fishbowl on the stand with the sign…’enter your business card for a chance to win an iPad’. Every day someone would put all of the business cards in a file, I asked why. The sales leader said, “the CEO asks that we collect 100 business cards per day…we are just giving them what they want”.
"When a measure becomes a target, it ceases to be a good measure"
The goal for any sales professional is to understand their prospect base, their needs, their pain points, their buying behaviour and to be understood and trusted enough that right when they have an issue…they are only thinking about you.
Different companies use data in different ways. They might collect data to improve their products and services or measure buying behaviour - Data is required for a business to function but it needs to be the right data and it needs to be analysed well and be used to create real value.
Companies collect other data, in many cases useless to their business but they on a hamster wheel and can’t get off. “we measure these number because we always have….”.
‘Where authenticity becomes ingenuine’
In an article written in November 2020, Jonathan Johnson wrote:
“Measurement can turn authentic human behavior into ingenuine human behavior.
On social media feeds, however, identifying this behavior is much more difficult. When using technology, people no longer listen holistically with their eyes and ears. Instead, people need to create benchmarks and generalizations to grade their user’s behaviours—they are often called Key Performance Indicators (KPIs) or user metadata. And no matter how much information is taken, or paid attention to, through metadata, a person is still only making judgements about a person through distilled information.
The benefit of meeting someone in person, not online, is what you can learn or assume about that person, both with and without explicit information. When you and another person are physically present, you can pick up on tiny cues, mannerisms, and other things that online metadata likely doesn’t know. In person, you can make a holistic assessment based on how that person speaks, how they appear, how they engage with you, how they treat the café barista, and a whole host of tangibles and intangibles.
Technologically, far fewer data points are available. Interactions are impersonal. Bad actors have an easier time of gaming the system.
Whether it is from a classroom setting, a small company, a one-on-one meeting, or measuring the GDP of a country”.
Goodhart Law’s is alive and well on social media……When a measure becomes a target, it ceases to be a good measure.
As the commercial world moves deeper and deeper into digital, it's important we are measuring the correct measures. Actionable measures that add real, tangible value to the business.
On social media, many will tell you it's all about the platform, or the profile, or the posts, or simply the connections….and we begin to become products of the numbers game.
The win with the strategic application of social media across your team is not to create a new series of bad measures, it's to enable you to create real demand for you, your team and your products and services and then convert that demand into profitable orders.
The next time you are having a Sales and Marketing KPI review, and you hear about clicks, impressions, SEO rankings, call rates, email totals…etc…. think of Goodhart’s law and dig deeper, ask...
So what..?
"What does this really mean, how does it help us and where does it add value?"
As we prepare to see off 2022 and welcome in a new year, its important your team have all they digital skills they need to build influence, create demand and move all of that to authentic, in person connection with people who can improve your business.
You are only going to be able to do this if you can see past ineffective KPIs and get to the very crux of the issue.
Live Social ‘22
Eric Doyle
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