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Business & strategy laws · law 003

Goodhart's Law

Also known as: When a measure becomes a target, it ceases to be a good measure

By Shivam Bhandari · Reviewed 31 October 2026 · How we write

what it means

When a measure becomes a target, it stops being a good measure — people optimise the number instead of the result it was meant to track.

How Goodhart's Law works

Metrics are proxies. Calls made is a proxy for sales effort; tickets closed is a proxy for customer help. The moment pay or praise depends on the proxy, people find ways to move the number without moving the real goal.

Goodhart's law does not say measuring is bad. It says single numbers tied to rewards get gamed, so you need balancing metrics and regular conversations about what the number is supposed to mean.

where it comes from

British economist Charles Goodhart described the effect in 1975 while writing about monetary policy. The popular wording comes from anthropologist Marilyn Strathern in 1997.

Goodhart's Law examples in business

Support desk

Agents rewarded on tickets closed per hour start closing tickets before problems are solved. Reopen rates climb and customers get angrier.

Sales

A team targeted purely on revenue offers deep discounts in the last week of each month. Revenue hits target while margin quietly collapses.

Hiring

Recruiters measured on time-to-hire fill roles quickly with weak candidates, and attrition six months later wipes out the gain.

How to apply it

  1. 1For every target, write down the real outcome it is meant to represent.
  2. 2Pair each target with a counter-metric that catches gaming (revenue with margin, speed with quality, volume with repeat rate).
  3. 3Review the numbers alongside real examples — read the tickets, listen to the calls.
  4. 4Rotate or retire metrics that have clearly been gamed.

common misreading

It is not an argument against targets. Teams without measures drift; the fix is better, balanced measures — not none.

ask yourself

Which number in your business could your team hit next month while the business actually gets worse?

put it into practice

Frequently asked questions

What is Goodhart's Law?

When a measure becomes a target, it stops being a good measure — people optimise the number instead of the result it was meant to track. Metrics are proxies. Calls made is a proxy for sales effort; tickets closed is a proxy for customer help. The moment pay or praise depends on the proxy, people find ways to move the number without moving the real goal.

Who came up with Goodhart's Law?

British economist Charles Goodhart described the effect in 1975 while writing about monetary policy. The popular wording comes from anthropologist Marilyn Strathern in 1997.

How do you apply Goodhart's Law in business?

1. For every target, write down the real outcome it is meant to represent. 2. Pair each target with a counter-metric that catches gaming (revenue with margin, speed with quality, volume with repeat rate). 3. Review the numbers alongside real examples — read the tickets, listen to the calls. 4. Rotate or retire metrics that have clearly been gamed.

What is a common misunderstanding of Goodhart's Law?

It is not an argument against targets. Teams without measures drift; the fix is better, balanced measures — not none.

Goodhart's Law in real case studies

Continental Airlines: from worst to first

After two bankruptcies, Continental ranked last for on-time performance. Gordon Bethune's ‘Go Forward Plan’ paid every employee a bonus when the airline ranked high — and it became one of the best-run US airlines.

Volkswagen Dieselgate: cheating emissions tests

Volkswagen installed software that detected emissions tests and cut pollution only during testing, in about 11 million cars. The scandal cost it over €30 billion and forced a pivot to electric cars.

Boeing 737 MAX: two crashes and a culture under scrutiny

Rushing to compete with Airbus, Boeing updated an old jet design rather than starting fresh. Software linked to two crashes killed 346 people, grounded the fleet for about 20 months, and cost Boeing over $20 billion.

Luckin Coffee: from accounting fraud to overtaking Starbucks in China

Luckin admitted fabricating about $310 million of sales and was delisted from Nasdaq. Under new management it restructured, focused on profitable app-based stores, and overtook Starbucks in China.

Enron: ‘America's most innovative company’ goes bankrupt

Enron used aggressive accounting and off-balance-sheet entities to hide debt and inflate profits. When the truth emerged in 2001, it went bankrupt and took its auditor, Arthur Andersen, down too.

FTX: a $32 billion crypto exchange gone in a week

Sam Bankman-Fried's FTX secretly moved customer deposits to his trading firm. When a news report triggered withdrawals, about $8 billion was missing and the company collapsed within days.

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