Trigger better decisions with Behavioural Sciences: If you want to actively shape the future as a supervisory board member and leader, you are constantly challenged to adapt yourself and your company to new framework conditions or to launch completely new business models . We all know only too well from our professional context that this requires not only strong leadership and vision, but also a motivated team and people who go along with the change. A nudge uses the latestfindings in the science of human behaviour for these change processeswithout any instructions or prohibitions. The concept has already convinced many decision-makers and earned economist Richard H. Thaler the Nobel Prize in Economics in 2017. In our new leadership series, we look at various options and best cases for companies, markets, society and your own personality.
You are probably familiar with daily applications of nudging from your everyday life: for example, when our fitness app rewards us for being active or reminds us that we have just been sitting for too long. Hotels and other sales platforms work with nudges about availability, e.g. “Only 3 rooms available” or social framing, e.g. “This hotel is very popular”. This highlights an important basic requirement for nudging to really work: We are always free to choose whether we respond to the little nudge or not – even if it would most certainly be better for our health to take the reminder to do our next sports session seriously.
Better decisions seem more strenuous
The founders of the nudge principle – alongside Richard H. Thaler, the legal scholar Cass R. Sunstein is the author of the behavioural science bestseller – define the nudging approach as a decision-making architecture that can change human behaviour in a predictable way without excluding any options or greatly altering economic incentives. The charm of nudging lies in its simplicity and can be explained by neuroscientific findings on people’s decision-making processes.
Change processes require a clear commitment and conscious decisions in favour of new opportunities, processes and positions. This can be supportedwith communication, role modelling and appreciation . The challenge here , however, is that we as humans only make around 20% of our decisions consciously – i.e. by reflecting on and weighing up the long-term effects. These judgements are strenuous and cost time and energy. The remaining 80%, and therefore the vast majority of our decisions, are made unconsciously and are characterised by emotions, impulses and inertia. Against these unconscious habits – which we have always done – logic is powerless, as is individual incentivisation. Decisions that we make out of habit skip a re-examination of advantages and disadvantages and unconsciously reward us with a lot of saved cognitive energy. We give in to this incentive quickly and willingly, even if the consequences are not necessarily the best choice for us – and in an economic context, not for the company either. With this knowledge of behavioural economics, we can now design the offers and choices – the so-called decision architecture – with a nudge in such a way that the smart decision becomes the first choice and less good alternatives can only be evaluated with greater cognitive effort: The better decision must become the simpler decision.
Taking the lead with nudging
For management culture, nudging offers an innovative toolbox for implementing a new corporate strategy better, faster or with greater motivation. By designing and influencing decision-making structures more consciously, decisions and the behaviour of organisational members can be steered in a positive direction with the right framework conditions and small rewards – for the individual development of each person as well as for the company as a whole.
In principle, the possible applications for nudging are as diverse as the decisions we make every day. Used responsibly, they are always a reliable driver of change. Look forward to best cases on green nudging or self-nudging and benefit from our checklists and design models for digital nudging or change management.
Sources
Nudge: How to initiate smart decisions. Richard H. Thaler and Cass R. Sunstein
Terra Xplore: How easy is it to manipulate our decisions?