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Since the rise of Thaler and Sunstein’s ‘Nudge theory’ to global prominence in 2008, the use of behavioural psychology has increasingly been adopted to encourage people to make choices. Even the UK government has taken its teachings to heart…
How’s It Being Used?
In 2010, the UK Government was the first to establish a ‘Nudge Unit’ (known as the Behavioural Insights Team) to help improve the cost-effectiveness of public services and to enable citizens to make ‘better choices for themselves’.
It’s seen much success. This includes increasing the number of UK residents paying their taxes on time, just by sending a letter informing them that citizens in their area pay taxes promptly. So why does such a simple intervention work? The answer lies in the use of confidence bias – the element of behavioural psychology that plays on the human instinct to compare ourselves to the people around us; to want to prosper, keep up with trends and please others. Benchmarking a person against their peers (or the people in their neighbourhood) spurs the desire to aim above the “average person” on tasks that are typically deemed as favourable – both to society and the state.
Like most things, the Nudge Unit has found that, the best ‘nudges’ will always target something ‘close to home’ for the recipient; the more personalised they are, the higher the engagement and take-up will be.
So What About the Workplace?
There are many ways that behavioural psychology can be adopted in the workplace to improve the skills, productivity and health of employees. Let’s take a look at a few ideas.
Recruitment and Diversity
A project to improve police diversity centred on the wording used during the recruitment process. Although c60% of applicants from a white British background were passing the situational judgment capability stage of Avon and Somerset constabulary’s recruitment process, only 40% of black and minority ethnic (BME) applicants were. By rewording the email sent to all candidates congratulating them on passing the previous stage to include a request for them to, “take some time to think about why you want to be a police constable” before moving on to the next test, 50% more BME candidates passed.
Training and Development
It’s easy to see how the method adopted by the Nudge unit to get people to complete their tax returns could be applied to Line Managers for example at appraisal time, but what about getting employees to attend training and development sessions? Another project cut the high dropout rate on adult literacy classes by 36%, simply by sending students a personalised text message every Sunday reminding them of their class.
Healthy Eating Choices
Research has shown that sales of healthy foods increased when they were placed closer to the cash register in canteens, and when signs were displayed reminding people to make healthier choices – products lower in sugar, salt and fat – on vending machines.
One of the things behavioural psychology teaches us is that people have a strong tendency to live for today, with little planning and a short-term approach to managing their finances. At Nudge we take the insights of behavioural psychology and apply them to providing Financial Education that will improve the Financial Wellbeing of employees.
We like to think of ‘nudging’ as akin to providing people with a financial sat-nav. First, we let people tell us what their Dreams and Goals are – what they want to achieve and where they want to get to? Second, we find out what they’re interested in learning about, how financially savvy they are and what level of risk they are comfortable with. Metaphorically, this is like asking a driver how confident they are and which routes they would like to take. Much like the sat-navs that alert you if there’s traffic or a speed camera ahead, we send different types of ‘nudges’ that tell users about financial changes that may affect them. At any point, users are free to change direction or include more in their financial journey by adding extra interests or different dreams and goals. The focus is that we’re working towards a common goal – helping people help themselves to make smarter decisions. Yet we do something that is above and beyond the conventional sat-nav: we allow them to see how people like them are challenging themselves – what goals they’re setting and what we’ve done for people on a similar journey that’s proven to be a success.
Behavioural Psychology – Driving Smarter Choices
We use ‘Nudge Theory’ in a number of ways to drive smarter choices:
- Situational-Bias: Using employer data (pay-rise, birthday, moving home) as a foundation for Financial Education, situational-bias means employees more likely to notice and take action.
- Confidence-Bias: We provide “People Like You” benchmarks (average mortgages, utilities, debt repayments), to give employees the context to engage with their finances.
- Rewarding Behaviour: Where employees engage more with the Nudge service including volunteering extra information about themselves, their Financial Education is more personalised and valued.
This system of ‘nudges’ in the right place at the right time really works. We have been able so far to not only act as an extra lens to equip employees with the ability to achieve their Dreams and Goals and take charge of their finances, but also provide employers with a better understanding about how and why their people do what they do. AB Inbev commented that ‘by working with Nudge to integrate Financial Education into our strategy we have been able to target and personalise the communication of our benefits to really impact how our people engage with them.’ They found that 65% of employees selected financial interests and subsequently starting to plan and achieve their future goals. Furthermore, the guidance we provide through ‘nudges’ had a broader company benefit, whereby 93% of employees now actively engage and make benefit choices.
Find Out More
For more information about how we can ‘nudge’ your people in the right direction and kick start workplace Financial Education with us, check out our video explaining the 5 types of nudge we send or contact us.