To nudge or not to nudge? | Analytics in HR

To nudge or not to nudge?

Few in HR seem to be (knowingly) utilising nudge theory. Can and should HR give people just a little push? You have a decision to make:...

Few in HR seem to be (knowingly) utilising nudge theory. Can and should HR give people just a little push?

You have a decision to make: to read this piece about nudge theory or not. It’s quite long and there are plenty of demands on your time, so maybe you’re tempted to turn away in favour of something else.

What if I were to tell you that reading on would be valuable, or suggest you would lose out by not continuing? After all, the father of nudge theory has become the most recent recipient of the Nobel Prize for economics. Would that little nugget of information, that carefully framed nudge in a certain direction, change your mind? Thought it might…

The Nobel judges’ decision in October 2017 to bestow their award on professor Richard Thaler underlines how prominent and influential nudge theory has become.

The term came to the fore in 2008 with the publication of Nudge: Improving Decisions About Health, Wealth and Happiness, the bestselling book on behavioural economics Thaler co-wrote with high-profile legal scholar Cass Sunstein.

Behavioural economics is essentially the study of how individuals make economic decisions, looking at the psychological, emotional, social and cognitive factors at play.

There is enormous potential for it to be used to significant effect in HR. Yet uptake in the field has been limited – knowingly at least; some HR professionals will have used nudge techniques instinctively.

So what is nudge? In their book Thaler and Sunstein outlined two systems of human thinking – the Reflective and Automatic systems. They argued that conflicts between these two frequently lead people to select the wrong option.

But this raises the vexed question of who is to say what is right or wrong for an individual. So long as they are acting within the bounds of the law, shouldn’t they be free to make their own choices? Even if others might perceive those decisions as flawed or damaging? Should there really be a role for the Nanny State or some manner of paternalistic organisation to intervene by seeking to influence individuals’ decisions?

In Nudge Thaler and Sunstein make the case for ‘libertarian paternalism’, which on the face of it is an oxymoron; bringing together two oppositional political philosophies (the laissez-faire minimal state interventionism of libertarianism and the more restrictive and controlling approach of paternalism).

People should still be free to make their own choices, ran the argument, but they could be given an invisible helping hand – a nudge! – to steer them towards making the right ones.

The trick in delivering the nudge lies in what the authors call ‘choice architecture’. Put simply: how choices are presented. An easy to understand example is how foods are displayed. If healthy options are placed at eye level while junk food is less prominent you are still giving people freedom of choice (if they really want a burger they’ll make sure they have it) while subtly steering them towards picking what’s better for them.

Success stories

Advertisers, politicians, preachers, researchers, self-help gurus, business leaders and many others have plundered psychology for generations to make use of the means and cues to push the right buttons.

But Thaler and Sunstein’s ruminations on choice architecture struck a chord and spawned a wave of nudge activity across governments, who have blazed the trail, and the public and private sectors.

The most notable of these was the creation of the Behavioural Insights Team (BIT) in 2010 shortly after David Cameron came to power. Often referred to informally as the ‘Nudge Unit’, it was the first government institution dedicated to the application of behavioural sciences.

The scope of its activities soon became very wide-reaching; from pensions uptake to organ donation, tax payment to reducing missed hospital appointments.

The BIT used nudge techniques to speed up the payment of £30 million a year in income tax by rewriting reminder letters to inform recipients that most of their neighbours had already paid.

Another success came in boosting police diversity. When recruiting new officers, Avon & Somerset Constabulary found that while 60% of white applicants were passing the situational judgment capability stage, the pass rate among black and minority ethnic (BME) candidates stood at 40%.

The BIT reworded the email sent to all candidates congratulating them on passing an earlier stage in the recruitment process, adding the request that they “take some time to think about why you want to be a police constable” before moving on to the next test.

While this change had no discernible impact on the performance of white applicants, the pass rate among BME candidates leapt by 50%. It’s believed that previously a significant number of BME applicants went wrong by trying to give the answers they thought a white candidate would provide.

The nudge in the email made a higher proportion trust their gut instincts, leading to the more honest responses recruiters wanted to hear and a much-improved success rate among these applicants.

On the back of some notable achievements, in February 2014 the BIT became a social enterprise company (although still partly-owned by the Cabinet Office). Then it was a team of just 14 people; four years on the company is 100-strong with offices in London, Manchester, New York, Singapore and Sydney.

Behavioural economics has taken off, other specialist businesses have entered the field, and a range of organisations have begun applying nudge techniques to solving problems in-house.

Click here to continue reading Rob Gray’s article.

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