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Six behavioral economics lessons for the workplace

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Advances in the behavioral sciences can better enable the human-centric design of programs, technologies, and organizations. Explore six lessons from behavioral economics that you can apply to your workplace. To learn more, view our special section on behavioral economics and management from Deloitte Review, Issue 18: http://deloi.tt/1TrSA6y

Published in: Business

Six behavioral economics lessons for the workplace

  1. 1. Behavioral Economics for the workplace lessons from
  2. 2. 2 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Humans are not perfect
  3. 3. 3 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. We overgeneralize from our personal experience, often neglect logical analyses, and are generally overconfident in our judgments
  4. 4. 4 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. These biases can impact decisions… …more than we may realize regulatory management economic
  5. 5. 5 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Concepts of modern psychology and behavioral economics offer us tools to better shape programs, policies and products in a human-centric spirit
  6. 6. 6 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Here are five lessons that illustrate how leveraging the principles of can improve your workplace Behavioral Economics
  7. 7. 7 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved.7 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Money can’t buy you innovation 1
  8. 8. 8 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. As a result, monetary influences often aren’t enough to cultivate innovation and creative thinking. Individuals are often motivated by professional pride, fairness, and the greater good of a community. Even when those motivators inhibit our pure economic earnings potential.
  9. 9. 9 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Leaders at any level can begin to instill an innovative mindset by consistently incorporating three behavioral concepts into their leadership style: To learn more, read “Nothing for money: A behavioral perspective on innovation and motivation” from Deloitte Review Issue 18 Download the article Recognize the accomplishments of your people Give your employees permission to fail Treat your employees well, and they will reciprocate
  10. 10. 10 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved.10 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Quick decisions aren’t always the best decisions 2
  11. 11. 11 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. However, prematurely switching to an execution-focused mindset may lead to excessive risk-taking. During pre-decision making, individuals adopt a deliberative mindset, where they evaluate information to reach their goal. In the post-decision stage, an implementation mindset takes over and individuals become committed to a course of action. implementation mindset deliberative mindset decision
  12. 12. 12 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. To learn more, read “Crossing the mental Rubicon: Don’t let decisiveness backfire” from Deloitte Review Issue 18 Download the article Executives should consider the following tactics before letting their mindset cross from deliberative to implemental: Conduct a “premortem” of available choices Focus on understanding rather than “go/no go” decisions Consider techniques like “devil’s advocate” or “dialectical inquiry” Hold off on implementing project management tools Pay attention to discordant data Consider bringing unbiased outsiders into the conversation
  13. 13. 13 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved.13 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Better HR through behavioral economics 3
  14. 14. 14 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. The time has come for a fresh look at evidence-based HR, founded on two key premises: HR practices, policies, and programs should be designed to reflect our best understanding of human psychology. HR practices, like all business programs, should be tested and validated.
  15. 15. 15 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. To learn more, read “HR for humans: How behavioral economics can reinvent HR” from Deloitte Review Issue 18 Download the article The HR domain should embrace three premises that correspond to the major themes of behavioral economics: Play Moneyball: When it comes to hiring and evaluating employees, even simple predictive models can run circles around unaided professional judgment Leverage intrinsic motivation: Traditional economic incentives can actually crowd out intrinsic motivations of high performance, innovation, and ethical behavior Nudge your colleagues: Smart choice architecture can reduce cognitive overload and help employees make better decisions
  16. 16. 16 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved.16 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Overcoming mental bias against additive manufacturing 4
  17. 17. 17 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Process change, fear, risk and skepticism are just some of the behavioral hurdles for some engineers. Rather than shifting to new design approaches when the situation warrants it, engineers often revert to well-worn, comfortable design paradigms, missing opportunities where additive manufacturing can create value.
  18. 18. 18 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. As companies continue to consider adoption of additive manufacturing (AM) beyond conventional manufacturing, managers may want to consider some of the following actions: To learn more, read “3D opportunity for engineers: Using behavioral science to help build a new mindset” from Deloitte Review Issue 18 Download the article Assess your own biases Establish a purpose for adoption Let change champions explore AM’s possibilities Create an action plan with manageable stages and precise solutions Forge relationships throughout the AM ecosystem
  19. 19. 19 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved.19 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Using behavioral research to nudge compliant behavior 5
  20. 20. 20 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Instead, by implementing smart, subtle communication changes, the New Mexico Department of Workforce Solutions was able to help its customers more accurately report information vital to the agency’s operations. Government agencies don’t always put themselves in the shoes of their customers. As a result, regular communication methods often fail to achieve the desired results.
  21. 21. 21 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. To learn more, read “Nudging New Mexico: Kindling compliance among unemployment claimants” from Deloitte Review Issue 18 Download the article If you’re looking to induce more compliant behavior in a process, consider these four dimensions of behavioral communications: Know your audience Make sure the system is built for humans Value through communication does not have to be a huge undertaking Consider how to gently nudge people in the right direction
  22. 22. 22 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved.22 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Slow thinking can lead to better thinking 6
  23. 23. 23 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Cognitive behavioral therapy (CBT) can help people recognize the circumstances around their negative thoughts and, consequently, slow them down to engage in more positive behaviors. We couldn’t function without fast thinking—the autopilot decisions that guide us through many ordinary situations. But fast thinking can lead us to blurt out the wrong thing in a meeting, make a poor strategic decision, or turn self-destructive. fast thinking slow thinking automatic thoughts we continually process complex, deliberate thought processes
  24. 24. 24 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Borrowing from what we know from behavioral science research and CBT practices, we can focus on several practices: To learn more, read “Think slower: How behavioral science can improve outcomes in life and the workplace” from Deloitte Review Issue 18 Download the article Identify the moments in which fast thinking betrayed you in the past Access things that put you in a positive mood Know your limits and give your mind a break Practice analyzing stressful scenarios can help enhance thought processes for future occasions
  25. 25. 25 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Applying these six lessons can help you put behavioral economics to work People are motivated to be innovative by intrinsic values, not money Don’t cross over to an implementation mindset too quickly Human resources should be designed with “Humans” (not “Econs”) in mind Don’t let fear of the unknown lead to missed opportunities Slow down fast thinking to avoid poor strategic decisions Behavioral research can be used to nudge compliant behavior
  26. 26. 26 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Share your thoughts with the hashtag #DeloitteReview Follow @DU_Press on Twitter Read more from our special section on Behavioral Economics and Management in Deloitte Review Issue 18
  27. 27. 27 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Meet the authors JOSH BERSIN founded Bersin & Associates, now Bersin by Deloitte, in 2001 to provide research and advisory services focused on corporate learning SHANIL EBRAHIM data science lead in the Deloitte Strategic Analytics & Modelling practice in Toronto, Canada JAMES GUSZCZA US chief data scientist for Deloitte Consulting LLP ALEXANDER BORSCH director of research, Deloitte Germany, Deloitte & Touche GmbH NICOLAI ANDERSEN partner with Deloitte Consulting GmbH and the Innovation leader for Deloitte in Germany
  28. 28. 28 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Meet the authors TIM MURPHY research manager with Deloitte’s Center for Integrated Research. His research focuses on issues related to behavioral sciences and their impact on business management. KELLY MONAHAN manager with Deloitte’s Center for Integrated Research. Her research focuses on the impact of behavioral economics on talent and leadership within organizations. MICHAEL GREENE senior manager and data scientist with Deloitte Consulting LLP JOY FOREHAND deputy cabinet secretary of the New Mexico Department of Workforce Solutions. JOHN FORSYTHE director with Deloitte Consulting LLP. He works with client leadership of large organizations to drive sustainable, culture- enabled, enterprise-wide changes
  29. 29. 29 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved. Meet the authors BRENNA SNIDERMAN senior manager with Deloitte’s Center for Integrated Research. Her research focuses on the application of advanced technologies in manufacturing. JEFF SCHWARTZ principal with Deloitte Consulting LLP, is the global Human Capital leader for talent strategies and marketing, eminence, and brand MICHAEL ROBERTO Trustee Professor of Management at Bryant University in Smithfield, RI. His research, teaching, and consulting focus on leadership. DEREK PANKRATZ research manager with Deloitte’s Center for Integrated Research. His research focuses on the confluence of emerging technological and social trends across industries.
  30. 30. About Deloitte University Press Deloitte University Press publishes original articles, reports and periodicals that provide insights for businesses, the public sector and NGOs. Our goal is to draw upon research and experience from throughout our professional services organization, and that of coauthors in academia and business, to advance the conversation on a broad spectrum of topics of interest to executives and government leaders. Deloitte University Press is an imprint of Deloitte Development LLC. This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or its and their affiliates are, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your finances or your business. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. None of Deloitte Touche Tohmatsu Limited, its member firms, or its and their respective affiliates shall be responsible for any loss whatsoever sustained by any person who relies on this publication. About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. Copyright © 2015 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited Sign up for Deloitte University Press updates at http://www.dupress.com @DU_Press

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