Goodhart’s Law says that when a measure becomes a target, it ceases to be a good measure. On marketing and sales dashboards, this means the thing being measured stops reflecting the actual commercial outcome. This article covers how the law works, common KPI mistakes, and three practical rules for avoiding the wrong metrics.
The core idea of the law rests on Charles Goodhart’s 1975 paper “Problems of Monetary Management: The U.K. Experience.” The familiar formulation, that a measure ceases to be a good measure once it becomes a target, is a later simplification of that idea, not a verbatim quote from Goodhart’s paper.
Written about central bank policy, the rule shows up today most often on marketing and sales dashboards.
How Goodhart’s Law works
The mechanism is simple. The moment a number becomes a target, two ways to raise it appear: improve the reality the number represents, or improve the number directly.
The second route is almost always cheaper and faster. Teams find it not through bad faith but by doing exactly what was asked of them and discovering the gap in the system.
Common KPI mistakes in marketing and sales
All three share the same shape: the metric improved while the performance it measured stood still.
The Wells Fargo case: the price of the wrong targets
One of the best-known examples is the Wells Fargo case. Bank management set aggressive targets for employees based on the number of products opened per customer.
To hit the target, employees opened accounts without customers’ knowledge; by the bank’s own analysis, more than two million deposit and credit card accounts may not have been authorized. In September 2016, penalties and settlements were announced: $100 million from the CFPB, $35 million from the OCC and $50 million from the city of Los Angeles, $185 million in total. CEO John Stumpf stepped down (retired) on October 12, 2016. The $3 billion federal settlement came in 2020.
The point worth noticing: nobody woke up one morning deciding to commit fraud. Everyone simply completed the target they had been given. The metric rose perfectly, while what it represented — a real customer relationship — collapsed.
Why companies fall into this trap
Because setting targets is the most visible and practical instrument management has. A number is clear, trackable and defensible in a board meeting.
The real outcome — net revenue, retention, profitability — moves more slowly and depends on variables no single department controls. Management wants fast feedback, and intermediate metrics supply it generously.
The problem is not using intermediate metrics. It is mistaking them for the goal.
Three practical rules
In closing: keep measuring, but manage the metrics
Managing without measurement is worse. The issue ends not with the metric itself but with the meaning loaded onto it. Noticing when a number stops representing reality and becomes a performance in its own right is routine maintenance on your growth system.
One question is enough for every figure on the dashboard: as this number rises, is the company actually winning, or is only the number rising?