Art of KPI Farming

🎧 Listen to this week’s edition · 6 min (New!)

Happy Thursday,

In 1902, the French colonial government in Hanoi had a problem. Rats, lots of them, and a plague scare to go with it. So it did what any sensible administration would do. It paid a bounty for every dead rat. To claim it, you just handed in the tail.

You can probably see where this is going. Before long, tailless rats were running around the city. People caught rats, cut off their tails, and let them go so they could breed more tails. Inspectors later even found rat farms on the outskirts of town. The bounty was soon scrapped, and the rats won that round.

You’ve probably heard the cobra version of this story. Funnily enough, there’s no solid evidence the cobra one ever happened, whereas the Hanoi rats are well documented.

We may not be counting rat tails in today’s corporate world, but the art of KPI farming is still very much alive.

🧠 LEARN something.

This phenomenon is called Goodhart’s Law, named after British economist Charles Goodhart. But you might be more familiar with the version most people quote, from anthropologist Marilyn Strathern: “When a measure becomes a target, it ceases to be a good measure.”

Here’s why. A number is useful because it tells you something about what’s really going on. Rat tails, for example, told you roughly how many rats had been killed. But the moment you attach money, praise or a performance review to that number, people stop working on the thing and start working on the number. And there’s almost always a cheaper, easier or lazier way to move the number than to move the actual results.

Wells Fargo is the corporate version. Staff were pushed to sell eight products per household, and branch managers were hammered on daily account targets. In 2017, the bank admitted up to 3.5 million accounts may have been opened without customers’ permission. The cross-sell numbers looked fantastic. The customers just didn’t know they were customers.

🤔 THINK about it.

When you hear the story of the rats of Hanoi, the easy assumption is that the people farming them were bad or dishonest. I’ve no doubt some were. But most of the rat farmers weren’t villains or criminals. They had simply worked out what was actually being counted and rewarded.

That’s the uncomfortable bit for us as leaders. The people best at hitting your targets may not always be your best people. Sometimes they’re just the best at reading and playing the game you designed. 

But hey, I don’t need to tell you this. You already know this from school. The kids with the highest grades weren’t always the smartest. They were often the ones who knew how to game the examination and school system.

And to make matters worse, the more senior we get, the more we tend to rely on dashboards and reports, and the less we see the work, the outcomes and the quality of what we deliver. So when the KPIs stop giving you the results you expect, you’re often the last to find out.

It also explains a slightly eerie pattern. A KPI goes green and stays green, quarter after quarter, while the thing it was meant to track quietly gets worse. Complaints creep up, good people leave, quality drops, customers drift and it’s starting to show in your P&L. Nobody’s lying, well, not exactly. The number has just stopped telling you the truth.

People are no longer achieving outcomes. They’re simply farming the KPI, without understanding what it was meant to measure in the first place.

✅ DO IT to get results.

So how do you turn this into action, and stop farming rats? Pick the one KPI or objective measure you watch most closely, the one that gets airtime in every leadership meeting. Then sit down with your team and ask three questions:

1. What is this number actually doing to get us closer to what we care about?

2. If this KPI disappeared tomorrow, how else would we know we’re getting there?

3. If it doubled overnight, what would change in our results?

That last one is where it gets interesting. The room often goes a bit quiet. People have spent months chasing the number or KPI, yet few can say what doubling it would actually mean for the results you deliver. That usually means you’re measuring activity, not progress. Or you’re looking in the rear-view mirror: the number is a lagging measure, telling you what’s already happened, not whether you’re heading the right way.

And if your KPI can’t stand up to those three questions, you might just have found your rat farm.

Until next week, keep it real, and stay curious!

Kenny

CEO & Founder | The Bridge Leaders