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How to use ‘nudge theory’ to improve decision-making at work

19 Jun 2019

Hays’ Anna Vaughan demonstrates how managers can use ‘nudge theory’ to improve many aspects of the workplace.

We all like to think of ourselves as the masters of our own destiny, navigating our way through life by making independent choices. But is this really the case?

According to psychology experts, we make some decisions using a subconscious autopilot that has nothing to do with thinking things through logically. Instead, we’re inclined to make irrational choices based on deep-seated biases like peer pressure, fear of missing out or an aversion to information overload.

Nudge theory – first brought to prominence in 2008 by Richard H Thaler and Cass R Sunstein in their book Nudge: Improving Decisions about Health, Wealth, and Happiness – aims to harness this phenomenon.

How have we been nudged so far?

By making small tweaks in how options are presented to individuals, nudge theory deliberately plugs into humans’ irrational decision-making processes to help steer people towards decisions that will benefit them.

Behavioural economist Jordan Birnbaum explains that the underlying reason for our irrational choices is a tendency to take shortcuts. He says: “Daniel Kahneman’s 2011 book Thinking, Fast and Slow outlines two types of thought that we all engage in. System one is fast, emotional, impulsive, intuitive. System two is slow, reflective, logical, thoughtful. Most of us stick with system one. It’s not lazy – it’s energy-efficient. If you used system two for every decision, you’d be exhausted by breakfast.”

Nudge theory has gained support at the highest levels. In the UK, the Government’s Behavioural Insights Team, or ‘Nudge Unit’ as it was dubbed, sent out tax bill reminders that had been amended to include a line informing the recipient that nine out of 10 people paid their taxes on time. This programme of small changes, leveraging the power of peer influence, saw £210m in overdue tax paid into the treasury.

Birnbaum recounts another example that makes use of human bias towards choosing the status quo. “In Germany, you have to tick a box to opt in to organ donation and the take-up rate is 12pc. In Austria, you have to actively opt out and the rate is 99pc. That’s because people will tend to go with the default option. It’s still a free choice, which should be a defining quality of a nudge, but this demonstrates their impact.”

Will nudges make us more rational at work?

With these sorts of results, it’s little wonder HR professionals are considering nudges to influence choices that could potentially benefit employees and the organisations they work for.

Leading Silicon Valley companies were among the first to apply nudge theory to increase the productivity and happiness of their employees. Birnbaum believes other companies will follow suit. “There are endless applications that leverage our built-in irrationality,” he says. “Take, for example, the fact that humans are twice as motivated to avoid losses as we are to secure gains. So, if you lose $20, that experience is twice as powerful as gaining $20. It should be the same level of impact, but we just aren’t wired that way.

“Now, say HR is encouraging managers to develop their leadership skills. You could tell them to think of the career advancements they could gain by improving as a leader. Or you could talk about the advancements they stand to lose by not improving as a leader. Changing a couple of words makes the second approach twice as motivating because of what we know about the human psyche.”

HR professionals might also use nudge theory to help staff make better financial decisions. Duncan Brown of the Institute for Employment Studies led a research project for the Chartered Institute of Personnel and Development that examined how behavioural insights might be used to do just that.

He found that one way this can be achieved is by understanding that people are put off by too much information – ‘cognitive overload’. Offering employees fewer, simpler options around pension fund choices, for example, can overcome this. Employees less stressed about finances are better engaged and motivated, he adds.

Could nudge theory drive diversity, inclusion and wellbeing?

Another specific area where HR professionals could make use of nudge is in tackling gender balance. Dorothy Dalton, CEO of 3 Plus International, a HR consulting firm that provides specialist services to attract, retain and promote female talent, says: “Business language and behaviour, as well as definitions of corporate success, tend to be male-coded. So it’s important to include photos and testimonials of female employees, especially those who work outside stereotypical female functions, to send more positive signals.

“Showcasing the profiles and successes of senior women as brand ambassadors is just one nudge that helps overcome the unconscious bias that leadership is a male activity.”

HR professionals can also nudge staff towards a healthier lifestyle. Ruth Tongue and Lucy Faulks of Elevate, a company that helps organisations improve the wellbeing of their workforce, point out that 50pc of UK workers say they’ve experienced anxiety or burnout in their current job, leading to feelings of demotivation and disconnection.

“Whether it’s putting fruit in common areas or offering subsidised gym memberships, there is always more that can be done to tackle these issues. While employees should all be free to make their own choices, giving them an invisible helping hand towards making healthier ones can only be a good thing.”

Could nudge theory work in practice?

Some managers might claim they’re already using nudge theory on an instinctive level, but Pelle Guldborg Hansen, a behavioural scientist at Roskilde University in Denmark and chair of the Danish Nudging Network, isn’t impressed.

“Managers tell me this, but then you follow them for a day or two and it’s clear that they haven’t,” he says. “They may be using various behaviourally informed strategies, but they often rely on intuition and cannot apply it systematically.”

Robbie Tilleard is a senior adviser at the Behavioural Insights Team, which is now a social purpose company jointly owned by the UK government, its employees and the innovation charity Nesta. He says: “At a micro level, anyone can try to apply nudge theory. It depends on the context and the organisation, but we’d say that resources and expertise are required to implement and evaluate it successfully. One approach to nudge strategy implementation is to start small and expand.

“A company we worked with started with outlines of footsteps on the floor that led to the stairs instead of the lift. The evidence collected showed an increase in footfall on the stairs, leading to a mandate for further nudges across the wider organisation.”

Nudge methods could even be used by HR professionals to change ingrained work habits. Tilleard explains: “An Australian employer we worked with had a strong nine-to-five culture but wanted to encourage more flexible working hours. Changing default time settings in Microsoft Outlook calendars to include hours outside of that framework, prompting managers to discuss flexible working and releasing data about people adopting flexible hours all had an impact. After just a couple of months, there was a 7.1pc increase in flexible working.”

However, despite good intentions, some employees will find nudge theory intrusive or patronising, while others will ask if employers should be engaged in influencing decision-making at all. Tilleard advises that careful design of nudges is key, with a “deep understanding of the context”. And, if possible, they should be co-designed with the target audience.

Like most experts in this field, Philip Ebert, senior lecturer at the University of Stirling and co-author of a paper on nudge theory, points out that organisations have always influenced employees’ decision-making. “While I think, in general, nudging is here to stay, there will no doubt be certain uses of nudges that are not acceptable. There are difficult and complex debates ahead of us about the ethics of nudging.”

By Anna Vaughan

Anna Vaughan is head of people and culture at Hays Asia.

A version of this article originally appeared on Hays’ Viewpoint blog.

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