We’ve mentioned incentives a few times now, so we probably need to stop pretending we’re not going to talk about them.
This is usually the point where people brace themselves, because they assume this is about greed, bonuses, or “bad behaviour”.
It isn’t really.
It’s about something much more awkward.
It’s about how we behave when rewards are involved — especially when we’re trying to do a decent job inside a system that measures us in slightly odd ways.
So let’s try an example.
Imagine we work in a factory
Nothing exotic. Just a normal place making something useful.
We’re on the shop floor. Our bonus is simple: if the company does well overall, we get a bonus. So all we really need to know is that doing our job properly helps the company perform well, and that’s good for everyone.
So far, so reasonable.
Then a new manager arrives.
They’re not bonused on how the company performs overall. Their bonus is based on whether their department stays within budget — and even better if they bring it in under budget.
Again, that sounds reasonable.
Different role, different responsibility, different incentive.
Nothing has changed for us… but everything has
Officially, our bonus hasn’t changed at all.
But our manager’s has.
And because of that, their behaviour starts to shift.
They begin encouraging us to delay replacing equipment unless it absolutely has to be replaced. Preventative maintenance gets pushed back, because that comes out of their budget.
When something finally breaks and an engineer has to be called out?
That comes out of the repair team’s budget — not theirs.
From the company’s point of view, this is a bad decision. Breakdowns are more expensive than maintenance, downtime hurts output, and the whole thing is less efficient.
From the manager’s point of view, it makes perfect sense.
They are doing exactly what they are rewarded for.
Nobody broke the rules
This is the important bit.
The manager isn’t being dishonest.
They aren’t trying to sabotage the company.
They’re not even doing anything unusual.
They are responding sensibly to how they are measured.
And once they do that, we adjust too.
We stop flagging minor issues.
We work around problems.
We quietly accept that “this is how things are done now”.
Not because we think it’s best for the company.
But because it’s what fits the system we’re in.
Scale that up, and it starts to look familiar
Now imagine this isn’t one factory.
Imagine it’s a large organisation, with layers of management, different budgets, different targets, and different bonus schemes all pointing in slightly different directions.
Everyone is doing what makes sense for their role.
Everyone is hitting their targets.
And yet, somehow, the overall outcome gets worse.
Not because people are stupid.
Not because they’re greedy.
But because incentives don’t just shape behaviour — they pull behaviour toward them, even when nobody explicitly agrees that’s what should happen.
This isn’t a factory problem
The reason this example works is because it’s not really about factories.
We’ve all seen versions of this:
- departments optimising their own budgets
- teams protecting their own metrics
- people making decisions that look odd from the outside but make perfect sense from where they’re sitting
Financial services just make this easier to see, because the numbers are bigger and the feedback is faster.
But the logic is exactly the same.
And this is why “they should know better” doesn’t help
There’s another reason that phrase doesn’t get us very far.
Most of us are also told — quite reasonably — to trust our managers. And their managers. And the people above them.
We’re encouraged to assume that someone, somewhere further up the chain understands the bigger picture. That the bonus schemes, targets, and incentives in play aren’t just random, but part of a thought-through system with checks and balances built in.
So when a new incentive appears, most of us don’t stop and ask how it fits into everything else.
We assume it’s been looked at.
We assume it’s been stress-tested.
We assume someone has asked, “What happens if everyone responds exactly as we’re encouraging them to?”
And most of the time, that trust isn’t foolish. It’s how large organisations function.
The problem is that as systems grow, they also get complicated — often more complicated than anyone realises.
Incentives get designed in isolation. Reviewed in narrow terms. Signed off because, on their own, they look reasonable. Sensible, even.
What’s much harder to see is how they interact with everything else.
So when behaviour shifts in odd ways, it’s rarely because someone deliberately designed a bad system. It’s because nobody quite saw how all the pieces would pull against each other once real people started responding to them.
Again, not intentional.
Just… accidental.
Bonuses aren’t the villain here
It’s tempting to blame bonuses themselves.
But bonuses are just one way of signalling what matters.
Sometimes the real incentive isn’t money at all — it’s promotion, reputation, not being the outlier, or simply not being blamed when something goes wrong.
And once those signals are in place, behaviour follows.
Not dramatically.
Just enough to matter.
Why this keeps repeating
After things go wrong, incentives are often tweaked.
Budgets are adjusted.
Bonuses are deferred.
New checks appear.
Some of that helps.
But as long as success is still measured in narrow, short-term ways, behaviour has a habit of drifting back.
Not overnight.
Gradually.
Because incentives don’t need to shout.
They just need to sit there quietly, nudging behaviour day after day.
And once they’re in place, they’re surprisingly hard to push against.
So where does that leave us?
If we’re honest, incentives explain more than we’re usually comfortable admitting.
They explain why sensible people make decisions that don’t add up at system level.
Why lessons are learned and then quietly forgotten.
Why behaviour changes even when nobody consciously decides to change it.
And they explain something else too.
If we know systems will drift back toward what they reward — even when everyone involved agrees that isn’t ideal — then simply telling people to “do better” was never going to be enough.
Which leaves an awkward, unavoidable question hanging in the air:
If incentives shape behaviour this powerfully… what’s meant to keep the whole system pointed in roughly the right direction?
That’s probably the next conversation.
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