A nudge for desirable behaviour

Several companies are using behavioural economics for HR practices

Behavioural economics has been a much-discussed topic after the Economic Survey last week devoted an entire chapter on how it provides insights to “nudge” people towards desirable behaviour even while preserving their liberty to choose. The chapter illustrated how the Swachh Bharat Mission and Beti Bachao Beti Padhao have successfully employed behavioural insights. 

One of the most successful use of the nudge technique was in the UK when the government was finding it hard to cope with the last-minute surge in tax payments. A Behavioural Insights Team set up by the government started sending repeated reminder letters to inform people that most of their neighbours had already paid. This speeded up tax payments considerably. Encouraged by the success, the UK government increased the scope of the nudge activities: From tax payment to reducing missed hospital appointments. 

Behavioural economics, which is essentially the study of how individuals make economic decisions, looking at the psychological, emotional, social and cognitive factors at play, is being used to significant effect in human resource practices in many large companies. In some cases, HR professionals are perhaps using nudge techniques instinctively, but they are effective nevertheless.

Google, for instance, partnered with Yale University to study how behavioural economics can improve employee wellness after it found that the effects of poor health and obesity cost a huge sum to US companies every year. So the company made subtle changes in the order of the placement of food to bring the attention of employees to healthier options and make it easier to choose. So placing the healthier items ahead of the unhealthy food on the shelf nudged the employees to pick those food items. 

Google and Yale researchers also experimented with promoting unpopular vegetables as the “Vegetable of the Day”. So they placed colourful fliers filled with fun facts about the food next to the vegetable in the cafeteria. This increased consumption of the vegetable by 74 per cent.

Other companies have done a variation of this by prominently displaying information about the calories in the various meals on offer. This is to help those who were watching their weight or trying to eat more healthy make appropriate choices. 

Behavioural economics actually came to the fore in 2008 with the publication of Nudge: Improving Decisions About Health, Wealth and Happiness, the bestselling book that Richard H Thaler co-wrote with legal scholar Cass R Sunstein. The trick in delivering the nudge lies in what the authors call “choice architecture”. Put simply: How choices are presented.

For example, research has also found that people use the office stairs more often if they are stylish and centrally located (in contrast, the elevator is in a corner and requires a key card). This not only encourages exercise; it creates a more open working environment.  

Thus, behavioural economics is a crucially important field for HR and can be employed in a broad range of activities — helping the company make the best hiring decisions and make people feel engaged with their work, etc. So many leading companies incorporate behavioural economics principles through nudges in most of their HR practices.

Behavioural science has also given companies insights into how employees’ minds work effectively. For example, it has been found that repetition and recall help employees learn better. So while planning their training programmes, many companies have incorporated a learner recall exercise every half an hour, or at the end of a session, or even a few months later. While some employees will find this irritating, many others find this useful, helping managements to get valuable feedback of the effectiveness of their training programmes and the tweaks they should make. 

The trick lies in properly thought-out messaging. For example, small, simple reminders that are helpful rather than pushy is what inspires positive action. Because when you make something top of mind in a non-interfering way, people are going to act on it. 

Thaler set out three principles, which he said, should guide the use of nudges: All nudging should be transparent and never misleading; it should be as easy as possible to opt out of the nudge; and there should be good reason to believe that the behaviour being encouraged will improve the welfare of those being nudged. Thaler once summarised his work in three words: “Make it easy”. Great companies follow that as the Bible.