Behavioural Economics 101: How a simple nudge can improve performance
When it comes to poor performance, interventions are often costly, time-consuming and require lots of effort. What if it doesn’t have to be that way? What if some small, easy to implement changes could boost the performance of you and your people right now?
Welcome to the world of behavioural economics and nudges.
Typically, improving performance at work focuses on whole organisational change, lengthy processes, and shiny new solutions. Focusing on the big fix slows down progress. It costs a fortune. And it's way more complex than necessary.
Behavioural economics tells us a different story.
What is behavioural economics?
Behavioural economics combines the worlds of economics and psychology to give a more-rounded explanation of how and why humans act.
Economical theory tells us that humans are in control of our own behaviour and decisions. It states we take well planned and rational actions all the time.
Data from the ONS shows only about 50% of working adults in the UK are actively adding to their pension pot. The economical view would suggest that being rational beings, we’d all be saving up, but the reality is very different.
20-years of social and cognitive psychology research suggests more than 90% of our actions are taken in a somewhat unconscious way. That is, economical theory might well be wrong.
According to behavioural economics, context-specific cues and pieces of information impact our actions all the time. We are not perfect decision-making machines. In fact we are very much open to outside influence when making decisions.
What is a nudge?
Nudging is the idea that we can influence behaviour with well-placed cues.
Researchers at Penn State University found that the size of plate offered in a cafeteria dictated how much food a person would eat or waste.
So, larger plate sizes led to more consumption and wastage as people felt obligated to fill the plate. By offering smaller plates, cafeterias reduced the amount of waste and help cut down on overconsumption.
This is an example of a nudge. Behaviour (in this case consumption/wastage) has been impacted by a small context change (smaller plates).
Nudging is all about shaping the environments in which people are making decisions so that the likelihood of them taking specific actions increase.
Examples of behavioural economics in the workplace
So what’s the impact of behavioural economic thinking at work?
Here are two examples:
General Electric reduces costs and absenteeism associated with workplace smoking
General Electric looked to behavioural economics to solve absenteeism and escalating costs linked to employee smoking.
The plan was simple; could monetary incentives help drive up the success rate of employees quitting smoking. They found the answer was a resounding yes.
Offering a small cash incentive at certain stages of the quitting journey improved success rates by 300%. And the impact lasted, with 92% of quitters still not smoking 12 months after the last cash incentive had been paid.
Reducing staff portion sizes at Google
Google employees are asked if they’d “like to go small” with their on-site meals. On average, between 14% and 33% of staff do.
Therefore this helps staff make healthier portion decisions that boost long term health benefits. It also keeps costs down for Google.
How can behavioural economics lead to better performance
There are an infinite number of nudges that managers and HR could look to apply at work that would impact performance.
But, here are three nudges for the workplace you can try today:
Goal-setting in psychology is an essential tool for self-motivation and drive both at personal and professional levels. It gives meaning to our actions and the purpose of achieving something higher.
Employees who have goals set see an increase in their own performance, even if the goals aren’t well planned!
Well planned, thought out and regularly reviewed goals are still the target as the benefits of these are far greater still.
Most nudges are based on social cues within our environment. Humans by nature are social creatures. We often look to others when deciding how to act.
By increasing the amount of collaborative work your employees are exposed to, you increase the opportunity to benefit from their peers.
So, try taking your top performers and have them lead a group of their colleagues through a task or project. They will help model what great performance looks like and help shape the future performance of those around them.
Listening to music while working improves employee motivation and increases productivity by up to 36%.
So, this is a simple and quick nudge that could offer up some real tangible benefits to performance.
The Weekly10 check-in has been designed with behavioural nudges in mind to ensure it helps your people become more engaged and better performers at work.