Perverse Goals & Incentives

“When the measure becomes the target, it ceases to be a good measure.” – Goodhart’s Law

OKRs are hailed as the holy grail of modern goal-setting—empowering teams to align, focus, and accelerate performance. But what happens when OKRs unintentionally incentivize the wrong behaviors?

Despite being designed for clarity and alignment, OKRs can quietly go off track. The culprit? Perverse goals and incentives—targets and reward systems that seem logical on paper but lead to counterproductive, even damaging behaviors in practice.

Think of Wells Fargo, where employees opened millions of fake customer accounts to meet aggressive sales targets. Or hospitals penalized for longer patient stays, leading to premature discharges and health risks. Even in tech, a well-meaning objective to “increase app engagement” has pushed teams to design addictive user interfaces, compromising ethical standards.

This article unpacks how perverse goals sneak into OKRs, the unseen damage they cause, and how to design goal systems that drive purpose—not pressure.

What Are Perverse Goals and Incentives?

Perverse goals and incentives are targets or reward systems that encourage people to take actions that are misaligned with the original intention—or even counterproductive.

The Cobra Effect: A Cautionary Tale

A classic example is the infamous “Cobra Effect” during British colonial rule in India. Faced with a rising cobra population in Delhi, the government offered a bounty for every dead cobra. At first, the plan worked. But soon, locals began breeding cobras just to kill them and collect the reward. When the government caught on and ended the program, the breeders released the now-worthless snakes, causing the cobra population to surge even higher than before.

This cautionary tale illustrates how well-intended incentives can backfire when people game the system.

In modern organizations, perverse incentives show up when employees are rewarded for vanity metrics, siloed wins, or output over outcomes—leading to short-term gains but long-term dysfunction. Understanding the difference between measured success and meaningful success is key to designing effective OKRs.

How Perverse Goals Creep into OKRs

OKRs are meant to inspire focus and strategic alignment—but when misused, they can quietly morph into performance traps.

Common Mistakes

• Treating OKRs as KPI replacements or rigid performance metrics
• Writing Key Results that promote vanity metrics (e.g., “increase followers by 50%”)
• Pushing “moonshot” OKRs without any context or support
• Applying top-down pressure without autonomy or psychological safety

In marketing, this might mean buying fake followers just to hit a Key Result. In product teams, rushing half-baked releases to meet launch targets. In HR, prioritizing quantity of hires over quality to hit a headcount goal.

The problem isn’t with the OKR framework—it’s how perverse incentives sneak in through misaligned OKRs, poor implementation, and unmanaged ambition.

Cultural Cracks: What Perverse OKRs Do to Trust and Teams

When OKRs go off track, the first casualties are trust and culture.

The Human Cost

• Teams avoid stretch goals for fear of failure
• Metrics are manipulated to appear successful
• Transparency is replaced with silence and stress

As Amy Edmondson describes, this is “organizational silence”—where fear outweighs learning. Departments start optimizing for their own OKRs instead of working toward enterprise-wide goals. Sales might overpromise, while operations scramble to meet unrealistic expectations—eroding trust and collaboration.

Eventually, this creates a toxic workplace culture marked by burnout, blame, and disengagement.

The Strategic Cost: Innovation Lost, Direction Derailed

Beyond cultural damage, perverse OKRs sabotage long-term strategy and innovation.

• Teams chase short-term wins to “look good” on dashboards
• Products are rushed or overbuilt to claim delivery
• Technical debt and customer dissatisfaction rise

When the goal becomes “meet the metric” instead of “solve the problem,” creativity dies. Teams stop experimenting, questioning, and learning.

Case in point: The Volkswagen emissions scandal. Employees manipulated software to pass emissions tests—driven by pressure to meet compliance targets. The result? A global ethical and financial disaster.

Unchecked, perverse OKRs don’t just fail—they take your strategy off course.

How to Spot the Red Flags Early

Perverse OKRs rarely arrive with warning labels. But smart leaders learn to spot the signs early:

Ask These Questions

• Are teams chasing metrics at the cost of meaning?
• Are incentives focused on outcomes or just outputs?
• Are failures hidden instead of shared and learned from?
• Are check-ins feeling more like appraisals than conversations?

Spotting these red flags gives you a chance to reset and realign—before the damage is baked in.

Designing OKRs to Avoid Perverse Outcomes

The antidote to perverse OKRs is intentional design—built around purpose, learning, and integrity.

Best Practices

• Write purpose-driven Objectives that inspire, not pressure
• Use leading and lagging indicators—avoid vanity metrics
• Align rewards with progress, learning, and collaboration
• Foster a safe space for experimentation and “fail-fast” learning
• Promote bottom-up co-creation of OKRs to ensure buy-in and relevance

Example Comparison

• Poor OKR:
    Objective: Increase brand reach
    KR: Add 50K Instagram followers
    (Result: Fake followers, no engagement)
• Healthy OKR:
    Objective: Build an engaged online community
    KR1: Raise engagement rate from 3% to 6%
    KR2: Host 3 live sessions with 100+ attendees each

Well-crafted OKRs are not just well-written—they’re ethically aligned and human-centered.

The Role of Conscious Leadership

At the heart of every effective OKR system lies conscious leadership.

Be a Steward of Purpose

Leaders must focus on why goals exist—not just whether they were achieved. When leadership is obsessed with numbers, people stop thinking and start conforming.

OKRs thrive in cultures of trust, experimentation, and meaning. That culture is seeded by leaders who challenge misaligned incentives, value transparency, and lead by intent—not intimidation.

Audit your OKRs—are they a compass guiding purposeful progress or just a countdown to compliance? The answer may define the future of your team.