In-House Counsel

Goodhart?s Law ?measures should not become targets

By Rees Morrison

In Edward Russell-Walling, 50 Management ideas you really need to know (Quercus 2007), the author mentions this so-called law (at 11). Data should serve as aids to analysis (See my post of June 14, 2007: basic good practices regarding data.).

The essence of the law is that once a social or economic indicator becomes a target for the purpose of conducting social or economic policy, then it loses the information content that would qualify it to play such a role. The law was named for its developer, Charles Goodhart (a chief economic advisor to the Bank of England).

Goodhart?s Law suggests that once a general counsel picks certain metrics to combine as a scorecard, the metrics begin to lose their value to inform. The reason is that the lawyers in the department start to ?teach to the test,? to alter practices that the metrics used to say something about, to intervene in the reporting and analysis of the metrics, and to nudge them closer to the implicit or explicit goal.

Full post as published by Law Department Management on May 25, 2008 (boomark / email).