I recently read and thoroughly enjoyed Carsten Tam’s article on Forbes.com titled “Small Is Beautiful: Using Gentle Nudges To Change Organizations.” In short, the article describes how Change Management can be improved using the concept of a “nudge,” developed by Harvard Law School Professor Cass Sunstein and Nobel Prize winning Economist Richard Thaler in their book appropriately titled… “Nudge.” Having some background on Thaler and Sunstein’s work, I would like to expand further on how their writings on Behavioral Economics have large implications for achieving success at managing change in the workplace.
For starters, you might ask “What is Behavioral Economics?” and more importantly, “Why does Behavioral Economics matter when I’m trying to successfully deliver a critical change project?” Behavioral Economics studies the effects of psychological, social, cognitive, and emotional factors on the economic decisions of individuals. The field of study involves rational choice; for example, why someone might take a smaller reward today over a larger reward tomorrow. It involves heuristics and how people make their decisions (and how we rely overwhelmingly on “rules of thumb” to make our decisions- about 95% of them). It involves theories of “framing,” or the mental and emotional filters individuals rely on to understand and respond to events.
At this point, it should be obvious that Behavioral Economics intersects with many of the challenges you’ll face in implementing a large change in the workplace. It has insight for managers encountering knee-jerk reactions and pushback from employees when informed about a CRM change. It explains why consolidating locations or operating areas might leave employees looking for gain today at the expense of their success in the uncertain future. And finally, it speaks to the fact that “how” we communicate plans to those undergoing change in the workplace might matter just as much as “what” those plans are.
So what else do Thaler and Sunstein say in their work that applies to Change Management? Well… lots. Notably, they discuss a number of powerful fallacies that influence behavior and how an individual might respond to a change initiative. Some examples of these are:
- Herd Mentality: Humans are heavily influenced by the thoughts and reactions of their peers and others around them. Whether or not the change could have positive outcomes for a single individual, if it is presented in a room full of those reacting in opposition, there’s a higher likelihood that this individual too will reject the change! This could make or break a project when you’re choosing between communicating to a group all at once, or building support with your team through individualized one-on-ones.
- Anchoring: Humans rely too heavily on one trait or piece of information. For example, the initial price offered for a used car sets the standard for the rest of the negotiations, so that prices lower than the initial price seem more reasonable even if they are still higher than what the car is worth. This same concept could mean that an employee who has had one negative experience with a new technology in the workplace might be more likely to reject another new technology introduced to them later, even if it’s entirely different!
- Status Quo Bias: This one is really Change Management in a nutshell. Humans are very likely to continue a course of action since it has been traditionally the one pursued, even though this course of action may clearly not be in their best interest. Sound familiar…? This is the fallacy at hand every time a change project is rejected on the grounds that it is different than what is happening today.
Lastly, among plenty of other information, they discuss the two systems of human thought developed by another Nobel laureate, Daniel Kahneman. This is a whole separate can of worms, but his work on the “automatic” and “reflective” systems of thinking, and how they often interfere with each other, is full of implications for successful Change Management. I would highly recommend his book “Thinking, Fast and Slow” for anyone in a business setting looking to improve the “human” aspect of workplace outcomes.
Alternatively, stay tuned to the Ignite blog for a post in the coming weeks on how this relates to your team or organization and how they navigate change!
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