This paper describes the evolution of a performance measurement system in a government job-training program. In this program, a federal agency establishes performance measures and standards for sub-state agencies. The paper shows that the performance measurement system's evolution is at least partly explained as a process of trial-and-error, characterized by a feedback loop: the federal agency establishes performance measures, the local managers learn how to game them, the federal agency learns about gaming and reformulates the performance measures, leading to possibly new gaming, and so on.
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