Summer Reading: ‘Mixed Signals: How Incentives Really Work’ by Uri Gneezy

By Jeremy Blake on July 20, 2023

As someone who works in training and development, I know how internal departments can sometimes hinder the effectiveness of our approaches. When it comes to developing people, one crucial factor that often gets overlooked is the impact of incentives on human behaviour.

In advance of a new project, when it comes to the people we are about to develop, I often ask myself, ‘what will stop them from doing this?’. The simple answer is incentives. An incentive will reward them but is often opposed to what we are trying to achieve. It will encourage the wrong behaviours, it’s often short-term, and ultimately will send the company into a pattern of decline. 

Sounds like doom and gloom?! Well, if you've worked with large organisations, you'll know that people have to shift products and services and make up the numbers. In ‘Mixed Signals’, Uri Gneezy, renowned lecturer in Behavioural Economics, delves into the powerful role incentives play in shaping our actions; building on the success of his previous co-authored work, ‘The Why Axis’, in which Gneezy shed light on how under-qualified executives are brought in, misinterpret data, leading to ineffective decisions and actions.

In this new book, Gneezy explores how many incentives failed to achieve their desired outcomes. He convincingly argues that incentives can inadvertently encourage wrong behaviours and short-term thinking that follow in the pursuit of achieving something, leading to a decline in overall performance for companies.

One of the big messages I have come away with is the fact that incentives send out strong signals to people about what matters and what they are asked to do. However, these signals might not always align with the desired goals. For example, if we want our children to read books, offering them money or sweets may get them to read, but it won’t necessarily instil a genuine love for reading.

Gneezy also highlights the notion that taking things away from people can motivate them to act, as they fear losing what they already have. While this doesn't mean that we should avoid paying bonuses in advance in good faith, believing they will have the aptitude and skill to deliver a project on time, we should be prepared to take them back if expectations are not met, thank you very much!

This book is full of lots of laugh-out-loud moments, with anecdotes about failed incentive schemes in various organisations, including some well-known ones that have failed dramatically. There are also some sad factors, things that made me really think about human behaviours and progress. It seems as if there’s a negative incentive for people to take risks with their health, despite so many advances in medicine and healthcare. And so many people work in professions that aren't related to any form of incentives whatsoever – I wonder how we incentivise professionals, like teachers, to focus on more than just exam results? Do we want our teachers to teach our kids to pass exams or play a part in helping them become healthy, well-rounded citizens?

‘Mixed Signals’ doesn’t just explore incentives in isolation but encourages readers to think about their broader impact in various contexts, and why people feel they must run them. I found myself contemplating this topic from different angles and spheres making this book a thought-provoking read.

If you’re eager to gain a deeper understanding of how incentives truly influence behaviour and decision-making, I highly recommend Uri’s book – it will leave you reflecting on its ideas long after you’ve finished reading. Happy summer reading!