The negative consequences of outcome-based goals often manifest months later in unrelated departments. This temporal and spatial separation, a feature of complex systems, makes it nearly impossible to attribute the damage to the original OKR, creating a cycle of invisible problems.
A team hitting all its targets is not an endpoint for celebration, but the starting point for an investigation. This counter-intuitive approach prompts leaders to ask critical questions, such as what unintended negative consequences this success could be creating for other departments months from now.
The demise of Sears is often blamed on Amazon, but the root cause was an internal policy. CEO Eddie Lampert split the company into 30+ competing business units, forcing them to act selfishly. This internal conflict destroyed collaboration and customer focus, leading the company to implode.
In organizations fixated on outcomes, people who highlight discrepancies between metrics and reality are treated as threats, not assets. The system is often designed to remove them, exemplified by Wells Fargo firing an employee for 'tardiness' just eight days after he used their ethics hotline.
When each department focuses solely on its own metrics, you get 'watermelon reports': green on the surface at every level, but red (failing) on the inside when viewed as a whole. This structural fragmentation ensures that systemic business decay remains invisible until it's too late.
Charles Goodhart's Law states that when a metric becomes a target, its value as an indicator is destroyed because people will manipulate it. For example, support teams might merge tickets to artificially lower resolution times, hitting their target without actually improving service.
Decades before OKRs became popular, W. Edwards Deming identified their core flaw. He argued that 'management by numerical goal' is a substitute for leadership and a way to manage without understanding the system of work. It encourages short-term thinking and gaming metrics, the precise issues plaguing modern companies.
The typical reaction to metrics being gamed is to introduce more leading and lagging indicators. However, this is a trap that falls prey to Goodhart's Law. It doesn't solve the underlying issue of goal fixation and instead just creates more numbers for teams to manipulate, further obscuring business reality.
According to Senge's Third Law of Systems Thinking, low-leverage interventions (quick fixes) provide short-term relief, making it seem like a problem is solved. However, this often hides the root cause, allowing it to return later in a more severe and damaging form.