Goodhart’s Law Is Quietly Wrecking Your KPIs
- 3 days ago
- 4 min read
You introduced a KPI to shorten customer service calls. Calls got shorter. Service got worse.
You told your recruiter to make 10 hires a month. They hit the target. Whether they were the right hires became secondary.
You gave managers a turnover target. Retention improved. Poor performers stayed.
That’s Goodhart’s Law at work: when a measure becomes a target, it can stop being a useful measure.
The problem isn’t that KPIs are bad. It’s what happens when people start optimizing for the number instead of the outcome the number was supposed to represent.
The KPI Isn’t the Outcome
Organizations need metrics. Without them, it’s difficult to know whether things are improving.
But we often make the mistake of treating the metric as if it is the result.
It isn’t.
What you measure | What you actually care about |
Time-to-hire | Hiring the right person |
Employee turnover | Having a strong, engaged workforce |
Training completion | Employees actually learning something |
Customer call duration | Resolving the customer’s problem |
Sales activity | Profitable growth |
Office attendance | Productive work |
There’s nothing wrong with tracking any of these measures.
The risk starts when hitting the number becomes more important than the reason we started measuring it.
People Pay Attention to What You Measure
If you tell a recruiter that success means 10 hires every month, you shouldn’t be surprised when filling 10 jobs becomes the priority. If managers are praised for keeping turnover low, some may think twice about addressing a difficult performance issue.
And if customer service representatives are assessed primarily on how quickly they end a call, they’re going to notice. That doesn’t necessarily mean employees are gaming the system. They’re responding to the system you’ve built.
Every KPI sends a message about what the organization really values.
Sometimes that message is much louder than the one in your values statement.
Where Goodhart’s Law Shows Up at Work
You can see the problem across almost every part of an organization.
Recruitment
Target: Reduce time-to-hire.
What could happen: Hiring decisions get rushed because an open requisition starts to look like failure.
Performance Management
Target: Keep regrettable turnover below a certain percentage.
What could happen: Managers become reluctant to have hard conversations or make necessary changes.
Learning
Target: 100% course completion.
What could happen: Everyone finishes the training. Nobody knows whether anything was learned or applied.
Customer Service
Target: Reduce average call duration.
What could happen: Calls get shorter, but customers call back because their problem wasn’t resolved.
Sales
Target: Increase the number of calls, meetings or proposals.
What could happen: Activity rises without any corresponding increase in good opportunities or revenue.
The metric may be doing exactly what you asked it to do.
That’s the problem.
Before You Set the Target, Ask These Three Questions
You don’t need to abandon KPIs. You do need to stress-test them.
1. What behaviour will this encourage?
Start with the most obvious response.
If someone’s performance depends on this number, what are they likely to do more of?
2. What might it discourage?
Every target creates trade-offs.
Speed can compete with quality.
Volume can compete with judgment.
Retention can compete with accountability.
Ask what might get sacrificed while everyone focuses on the target.
3. Could someone hit the number and still produce a bad outcome?
This is the big one.
Could your recruiter hit 10 hires and still hire the wrong people?
Could a manager achieve low turnover while keeping persistent poor performers?
Could every employee complete mandatory training without changing a single behaviour?
If the answer is yes, one metric probably isn’t enough.
Pair the Metric With the Outcome
One of the simplest fixes is to stop relying on a single KPI.
You don’t need a dashboard with 50 measures. You just need enough context to tell whether the number represents actual success.
Instead of tracking only... | Consider pairing it with... |
Time-to-hire | Quality of hire, 90-day retention |
Turnover | Performance, engagement, regrettable turnover |
Training completion | Knowledge checks, application, behaviour change |
Call duration | First-contact resolution, customer satisfaction |
Sales activity | Conversion, margin, revenue quality |
That second measure acts as a counterweight.
It makes it harder to improve one number by damaging something else.
A Simple KPI Stress Test
Before introducing your next KPI, ask:
What outcome are we actually trying to improve?
Is this metric measuring the outcome or just a proxy for it?
What will employees do differently once they know this number matters?
What could they stop doing?
Can they hit the target while missing the point?
What second measure would tell us whether the outcome really improved?
If you can answer those questions, you’re much less likely to create a KPI that looks good on a dashboard while causing problems everywhere else.
When the Dashboard Is Green but Something Feels Off
This is where Goodhart’s Law becomes particularly useful for leaders.
Your dashboard might show:
hiring is faster,
turnover is down,
training completion is at 100%,
productivity metrics are up, and
customer calls are shorter.
Everything’s green.
But are you hiring better people? Are your best employees staying? Did anyone learn anything? Are customers happier?
That’s the distinction worth paying attention to.
A better number doesn’t automatically mean a better outcome.
The next time a KPI improves, don’t just ask:
Did we hit the target?
Ask:
Did the thing we actually care about get better?
How Orion Can Help
Orion HR helps organizations strengthen performance practices, clarify expectations and align measures with the outcomes that matter. Whether you’re reviewing your performance management approach, developing meaningful organizational metrics or looking for ways to turn data into better decisions, we can help you look beyond the numbers.
Let’s make sure your KPIs are measuring what actually matters..
Contact the Orion HR team to discuss how we can help.
