Friday, August 7, 2009

Goodhart's Law

Kerajaan telah memperkenalkan sistem KRA dan KPI bagi meningkatkan kecemerlangan service delivery system dan penerapan performance achievement culture di kalangan penjawat awam. Parti UMNO juga bercadang untuk menggunapakai sistem yang sama bagi parti tersebut, ujar Tan Sri Muhyiddin Yassin.
I have no objections against the adoption and implementation of KRA and KPI systems by the government or UMNO and I sincerely support the moves. My only concern is on its implementation, especially on the trapping of performance targeting and problem solving – commonly known as Goodhart’s Law, yang di perkenalkan oleh Prof. Charles Goodhart.

In essence, Goodhart’s Law says that if you control an indicator to a particular problem, or target, then that indicator ceases to become a good indicator. The law has many applications in economics, politics, financial management as well as our social lives. Imagine a scenario of a group of students whom is asked to rate the performance of their teachers in class. Given its importance, some of the teachers might feel the pressure to bilk the system by offering incentives for certain students to rate them highly. As a result, the rating is now tempered or regulated by an incentive scheme that effectively ruins its accuracy and representation – and that’s when Goodhart’s Law start to operate, i.e. to control is to distort.

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