Goodhart's Law
Happy Friday,
Two consulting engineering firms, A and B, compete for the same clients and talent.
Both believe engineering excellence wins clients. Both believe meaningful work, professional growth, and making a difference attract, motivate, and retain great people.
Both want to make money. And they should. Profit rewards risk, funds investment, creates opportunity, and enables greater impact.
But here's where A and B diverge.
Company A's leaders view their business as a virtuous cycle. A flywheel.
Excellence attracts talented people and challenging work. Challenging work develops expertise, inspires people, and builds reputation. Reputation attracts more talent and better opportunities. Growth and profitability are the result.
Company A's leaders carefully track financial metrics, especially utilization, but almost never make them the focus of conversations with employees. Instead, they relentlessly reinforce their flywheel: excellence, client value, professional growth, and the firm's mission.
Company B's leaders also believe in these things. But their employees hear far more about utilization, budgets, and financial performance. Week after week, the ever-present numbers dominate the conversation or linger nearby.
What leaders talk about most becomes the organization's de facto mission.
"Our mission is to get utilization above 70% and keep it there! Come work for us!!!"
Years pass. Company A attracts stronger, highly engaged talent, retains more of it, wins better work, has fewer problems, and earns higher profits as a result. They're having fun.
Company B struggles with mediocre engagement and constant turnover, recruiting, and the relentless pressure to improve its numbers (which never really improve much). Not having fun.
Company B's leaders are trying harder to achieve the very results Company A produces as a natural byproduct.
Goodhart's Law explains why.
"When a measure becomes a target, it ceases to be a good measure."
Consider a school judged by test scores. Teachers begin teaching to the test. Scores improve, but are students actually learning more?
The measure of success has displaced success itself.
The same thing happens when utilization becomes the dominant message in an engineering firm.
Metrics are essential management instruments. They should inform leadership, not define it. Leaders exist to create the conditions that produce great numbers.
At your next team meeting, spend less time reviewing numbers and more time recognizing excellence, celebrating client impact, and discussing how to improve your firm.
Punchline: The results you want are like sand in your hand. The tighter you squeeze, the more they slip away. Don't confuse the results of a successful business with the reasons a business succeeds. They're two very, very different things.
Have a great weekend,
Dave
Feedback, blowback, and suggested topics are always welcome: dave@goodnewsfriday.com
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