Principal Agent, Signaling
The Number on the Board
The Number on the Board is a Principal Agent and Signaling scenario. The core lesson: A measure chosen to stand in for a goal becomes the goal once careers depend on it, and people optimize the measure rather than the thing it was meant to represent. You run retail branches for a large bank. Your executives want deeper relationships with existing customers, on the reasoning that a household with several products stays longer and is worth more. DecisionPlay maps the players, payoffs, and equilibrium dynamics that shape how this situation typically resolves.
The situation
You run retail branches for a large bank. Your executives want deeper relationships with existing customers, on the reasoning that a household with several products stays longer and is worth more. Relationships are hard to see from headquarters. Product counts are easy. So the count becomes the target: every branch has a daily number, the number is read out in morning meetings, and it feeds the reviews and bonuses of everyone from the teller window up through your own job. In the first year the number rises and everyone is pleased. In the second year you start noticing accounts that customers never use, opened at the end of quiet months, and staff who look frightened rather than motivated. You raise it with your regional director, who points out that the number is still climbing.
Background
Between 2011 and 2016 Wells Fargo employees opened large numbers of deposit accounts, credit cards, online banking enrolments and debit cards for customers who had not asked for them. Regulators and, later, federal prosecutors tied the conduct to sales targets and the compensation attached to them. The paired brief carries the labeled figures and the enforcement record. This scenario puts you at the level where the target meets the people expected to hit it.
What this reveals
The measure becomes the target, and then stops measuring
A proxy gets chosen because the real goal is hard to observe. Attaching careers to the proxy gives everyone below you a reason to produce the proxy directly rather than the goal behind it, and the harder the target, the more attractive that shortcut becomes. The number keeps rising while the thing it stood for gets worse, and the rise is what stops anyone from looking.
How to counter it: Ask what the cheapest way to move this number would be if you were desperate, and assume someone will find it. Prefer measures that require the real outcome to survive over time, sample them independently, and treat a metric that never disappoints as a warning rather than a success.
A question to sit with
Which number in your own organization would you be most reluctant to audit, and what would that audit find?
Frequently asked questions
- What game theory concept does The Number on the Board illustrate?
- The Number on the Board illustrates Principal Agent, Signaling. A measure chosen to stand in for a goal becomes the goal once careers depend on it, and people optimize the measure rather than the thing it was meant to represent.
- What is the situation in The Number on the Board?
- You run retail branches for a large bank. Your executives want deeper relationships with existing customers, on the reasoning that a household with several products stays longer and is worth more. Relationships are hard to see from headquarters.
- What does The Number on the Board reveal about how people decide?
- The measure becomes the target, and then stops measuring. A proxy gets chosen because the real goal is hard to observe. Attaching careers to the proxy gives everyone below you a reason to produce the proxy directly rather than the goal behind it, and the harder the target, the more attractive that shortcut becomes. The number keeps rising while the thing it stood for gets worse, and the rise is what stops anyone from looking.
- How do you avoid the trap in The Number on the Board?
- Ask what the cheapest way to move this number would be if you were desperate, and assume someone will find it. Prefer measures that require the real outcome to survive over time, sample them independently, and treat a metric that never disappoints as a warning rather than a success.
- What is the research behind The Number on the Board?
- Between 2011 and 2016 Wells Fargo employees opened large numbers of deposit accounts, credit cards, online banking enrolments and debit cards for customers who had not asked for them. Regulators and, later, federal prosecutors tied the conduct to sales targets and the compensation attached to them. The paired brief carries the labeled figures and the enforcement record.
- How long does The Number on the Board take to play?
- About 7 min, at core difficulty, across 3 decision points. It runs in your browser with no account and no sign-in.
Keep exploring
More Historical Perspective scenarios, or browse all scenarios. New to this? Start with how DecisionPlay works or the game theory glossary.
Topics: metrics, incentives, principal-agent, goodhart, organizations, banking