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June 18,2020 Change Management

Using Nudges For Change

Using Nudges For Change

Using Nudges For Change With 401Ks

In 1978 Congress passed the Revenue Act which included a provision giving employees a tax-free way to defer compensation an early start to using nudges for change. What was intended to supplement retirement savings quickly became a new avenue for corporations to escape the liability of pension programs? In the span of 30-years, the number of private sectors offering pensions dropped from 38% to 13%.

Employees were sold on the belief that they would control their retirement. However, data would show that not everybody participated in the program. The data also pointed to millions of people that didn’t have enough resources to retire. Tracing back the cause researchers found that people were not opting into the savings program and not taking the free money offered by many companies in their matching policy.

Nudge theory viewed the opt-in options and changed the form to auto-enroll with an opt-out option. This simple change contributed to significant enrollment for numerous companies that changed their choice architecture. The original theory points to situations where people can be lazy and procrastinate by nature. The simple act of checking the box led to new employees to see a full paycheck and to normalize that amount. Thus, creating a sign-up issue later due to loss aversion and decreasing their paycheck from what they had normalized.

British Behavioral Change Unit

In 2010, the UK Prime Minister David Cameron wanted to take a different approach to policy and change adoption throughout the government. With David Halpern, he established the behavioral insights team. Commonly referred to as the Nudge Unit, this team focused on applying insights to inform policy and increase compliance.

One of the Nudge Units early victories came on late tax payments. Believing that humans are social creatures their hypothesis was that people would aim for conformity. The Unit decided to send notices to all taxpayers that suggested that most people paid their taxes on time. This simple notice resulted in an increase of one-time payments by over a hundred thousand individuals.

Another breakthrough the Unit solved focused on medical prescription errors. Namely, pharmacists had trouble telling the difference between microgram and milligram on written prescriptions. This could lead to a disastrous mistake in terms of overdosing. The team simply changed the prescription form to circle one instead of writing it. This resulted in the elimination of overdosing due to misinterpretation. What the British government has accomplished though is a process that every corporation can apply, teams focused on positive change adoption through simple suggestions and great choice architecture.

Nudges at Work

Parkinson’s law states that work will expand to the time allotted. This includes meetings that magically take exactly thirty minutes or an hour. Attendees then race to get to their next meeting, and they are inevitably late. Microsoft, the main scheduling and calendar office tool, then enabled different presets for scheduling meetings. Instead of thirty minutes, it suggested a twenty-five-minute meeting. Instead of an hour-long meeting, it suggested a fifty-minute meeting. Early results point to a significant decrease in meeting start time delays.

Boston Consulting Group is not different from other companies when it comes to overloading employees with e-mails. This problem grew even more grating when it came to e-mail outside of normal working hours. The simple nudge put in place was that when managers attempted to send an email after standard work hours, they received a prompt. Their choices consisted of mark low priority, defer to next business day, send e-mail as is, or cancel. After hour e-mails decreased significantly.

Google, famously known for their progressive work habits and teamwork began to experience issues with some of their teams working on joint ventures. Google’s nudge was to implement a quarterly survey to help shape behavior. The two-question survey only asked, “last quarter this person helped me when I reached out to them” and “this person involved me when I could have been helpful or was impacted by their team’s work.” Joint teaming efforts spiked following the survey’s implementation.

References

How We Nudged Employees to Embrace Flexible Work

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