The Performance Gap: Issue 11

Last week I wrote about psychological safety, specifically about the gap between what Amy Edmondson's research actually found and what most organisations have done with it. One of the themes running through that issue is the way organisations create conditions that produce the appearance of what they want without the substance. This week's issue is about the structural mechanism that drives that pattern.

What gets measured gets managed. And then it gets gamed

Charles Goodhart was a British economist who observed, in the 1970s, that once a measure becomes a target, it ceases to be a good measure.

This observation (now known as Goodhart's Law) has been replicated, refined, and documented across every sector and every type of organisation for fifty years. It is one of the most robust findings in management science. And it is violated, systematically, by almost every performance framework in almost every organisation operating today.

The reason is not ignorance. It is structural. The moment you make a metric the primary basis for evaluation and reward, the people being evaluated begin (rationally, predictably) to optimise for the metric rather than for what the metric was designed to capture. They are not being dishonest. They are responding to incentives, which is exactly what humans do.

What Jerry Muller's research shows

Jerry Muller's The Tyranny of Metrics documents the scale of this problem across education, healthcare, financial services, policing, and professional services. In each case, the pattern is the same: A metric is introduced to measure something that genuinely matters -> organisations and individuals respond by optimising for the metric -> the metric becomes progressively less connected to the thing it was designed to capture -> and eventually the measurement system is producing data that tells a story almost entirely divorced from reality.

The examples are familiar. Hospital waiting time targets that lead to patients being held in ambulances so the clock doesn't start. Sales metrics that incentivise short-term transactions over long-term relationships. Crime statistics managed downward through reclassification rather than crime reduction.

In leadership development, the equivalent patterns are well established. Training completion rates that measure attendance. 360 feedback scores that measure how much people like their manager. Engagement survey results managed through pre-survey communications rather than changes in working conditions.

The three failure modes

Measurement displacement: The metric becomes the goal rather than a proxy for the goal. People stop asking “are we doing the right thing?” and start asking “are our numbers good?”

Gaming: Behaviours change to improve the metric without improving the underlying reality. Sophisticated enough to be invisible in most reporting systems.

Crowding out: The unmeasured but important is progressively neglected in favour of the measurable. The things that matter most to long-term leadership development (quality of relationships, quality of thinking, quality of decisions under pressure) are the hardest to measure and therefore the first to be deprioritised.

The question for the week

What are the three metrics most commonly used to evaluate leadership performance and development in your organisation? For each one: What behaviour does optimising for that metric actually produce? Is that the behaviour you want? And what genuinely important things are those metrics failing to capture - and therefore allowing to be neglected?

Next week: The final issue of Season 1! What has to be true at an individual, team, and organisational level for leadership development to produce durable change - and what it means for how you invest in the people your strategy depends on.

Dr Andrew A Walker | Chartered Psychologist | Leadership Coach | andrewantonywalker.com

If something in this issue resonated and you’d like to think it through in the context of your own organisation or leadership - a Chemistry Session is a free 30-minute conversation. No pitch, no obligation. Book here.