• Katie Best

How can nudge theory help us to be better leaders?



No matter which leader you look at, or which type of business leadership approach you subscribe to, almost all of them have one key skill in common: influence. All the way back to the earliest business leadership theories in the 1950s, to those of today, a good leader is usually seen to be one who has the power to change the behaviour of a follower. However, that’s not always easy to do.


The leadership environment is complex, and can be riddled with difficult decisions. Also, changing people’s behaviour is notoriously hard. We, as leaders, can try to use our charisma or coercion; appeal to our followers’ rationality; or hope that our skills of organisation and our intellect will win at the end of the day, but sometimes this just isn’t enough. There are however, many little helpful things, actions, responses, etc., that can make it easier to influence, perform our leadership role, that can tip the balance in our favour.


In recognition of the power that small actions can have, it’s interesting that not much has been said (yet) on the role that nudges may play in improving leadership. What is a nudge, and can leaders use nudging to increase their influence with their teams and colleagues?


What is nudging?

A nudge, also known as choice architecture, is something which alters people’s behaviour in a predictable way without forbidding options or significantly changing economic incentives. It can be physical (buildings or system design); psychological (tapping into the way we think and why we take action); or sociological (focusing on group culture or norms). Originated by Professor Richard Thaler, whose work on nudging won him the 2017 Nobel Prize for Economics, a nudge has a nice little acronym to explain precisely what nudge theory does to create nudges and, in the case of leaders, what they can do to influence their teams’ actions and decision making, becoming ‘choice architects’ in the process.


iNcentives: Incentives are a key part of nudge theory. Nudge theory recognises that incentives encourage people to take one action over another. For example, if you pay people a token amount for giving up smoking, they are more likely to quit than without it.


Understand mappings:

Nudge theory recognises that you need to understand how different ways of presenting information and choices might lead to different outcomes. By understanding how different choices are responded to differently - either through reading up on what works, or through experimenting yourself - you can try to alter the choices that people make.


Defaults

All things being equal, people are more likely to choose default options. A default option is one which is pre-selected, so going for another option requires action. For example, if you present organ donation as ‘opt out’ rather than ‘opt in’, you get a much higher uptake. This may in part be because people are a little lazy and go for the easy option, and in part also be because people become ‘anchored’ to the default very quickly and feel a sense of loss aversion at the prospect of taking a different choice.


Give feedback

Well designed systems tell people when they are doing well, and when they are making mistakes. Nudge theory says that we should give feedback as soon as someone starts to steer away from the right path, so they have the opportunity to correct their action.


Expect errors

Nudge theory reminds us that normal human beings interacting with and in the real world make mistakes all the time. When we are designing systems or processes, we need to design with a flawed end-user in mind, and make sure that their mistakes don’t create problems.


Structure complex choices

Too many choices can overwhelm, leading to decision paralysis. Too many choices can lead someone to be unhappier with their final choice than they would be if choosing from a smaller set. Nudge theory suggests that, if you want action, you should restrict and structure choices into a more limited range, and makes it easy to select between them. If you’re laptop shopping, websites allow you to pick 2 or 3 and compare their characteristics, rather than having to look at all of them. This is an example of structuring a complex choice.


Relating nudging to leadership


A key element of leading is exerting influence, and nudging is a tool that leaders can use to influence their teams towards positive action. By creating nudges, leaders can drive their projects forward in ways which benefit the team and the organisation. By being aware of what nudges are, and how to enact them, organisations can also help their leaders to improve their efficacy. But what does it look like in practice? Some examples might help.


Example 1(a): Improving work-life balance


A recent client - a city law firm - has been focusing heavily on improving work-life balance in their organization. Law is an industry beset with a ‘long-hours’ culture and mental health concerns, and the two things are very much related. The company culture, on paper at least, said that they had a good work-life balance, but a large staff survey showed that in pockets of the business, this was far from the case. New recruits felt frustrated, and turnover was higher than the firm would have liked. There was a realisation that, alongside a reeducation piece operating at firm level, there were opportunities for smaller actions at team level to get things back on track.


The issue seemed to be arising from there not being enough hours in the day to do what the firm expected, and what the clients expected. Freeing up more time for trainees and associates to get on with client work would give them more time away from the office.


Nudge #1:

  • Move away from a high level of choice over length of team meetings.

  • Meetings that were 30 minutes or 1 hour, which often dragged on past their finish time, moved to default 20 minute meetings.

  • This was communicated by the leading partner as the new standard

  • In a different tech environment, the ideal could have been to change this to the default on the team’s digital calendar settings.

  • What was once a complex choice became much easier.


Nudge #2:

  • The meetings were changed to standing.

  • Tired feet provide a good incentive for wrapping things up, and the team seemed more inclined to get through things quickly.

It’s not to say they never have seated meetings - there are lots of times when they’re still needed, but having established 20-minute meetings as a default, this was able to work. End result: the new meeting default combination clawed back valuable time for the team.

Example 1(b): Improving work-life balance


Another action that has worked really well in a rival firm to deal with the intrusion of emails on every hour of a lawyer’s life is to set a default on internal emails that, if they are sent during antisocial hours, they are held back by the server until 7a.m. It’s possible to override the default, but again, it takes effort, and forces workers to question their choice. This approach expects errors. If we are left to our own devices to remember to add a delay, we are likely to forget, so the system helps us. The senior leadership team were heavily praised for this initiative - it was felt as though it had a very positive effect on perceptions of what is expected and reinforced a culture that was about being allowed to have downtime during the week.


Both of the nudges described above, allowed the leaders to exert a positive influence over the organizational culture - both its reality and the team’s perception of it. They were able to reinforce the importance of work-life balance through action without removing any options or choices, but helped their teams to choose a ‘path of least resistance’ that allowed better cultural alignment between the team and the firm.


Example 2: Removing silos


Another organisation I recently worked with (a not-for-profit professional education institution) was really keen to try to remove silos and improve cross-team working. They felt as though they were regularly missing out on the benefits of drawing expertise on complex issues from a cross-section of the organisation's employees. Because cross-team working wasn’t common, there were lots of people unaware of what other people did. As an organisation of under 200 employees, plus a cluster of close associates, this was a realistic goal. One senior leader trialled a range of different approaches to see what would work for them. The great benefit of nudging is precisely that: as they tend to be low-stakes actions, you can play around to see what fits.


Most successful nudge solution:

  • One initiative was particularly successful: incentivising networking.

  • He would provide the funds for pairs of people from across the organisation who had not worked together before, to go out for a sandwich lunch or a coffee.

  • The cost to the firm was minimal, but the opportunity to leave the building and be given a ‘gift’ by the organisation worked very well.

  • From a nudging perspective, this initiative may have also worked because it removed the awkwardness of approaching another to see if they wanted to talk:

  • Rather than facing a complex choice over how to make an approach and follow up on it, there was a clear choice: take the money and go for a coffee. Awkwardness removed. Opportunity created. And it worked.

More leaders in the organisation adopted the initiative, and in embedding it tightly in the organization's culture in this way meant that it benefited from network effects: more people understood its benefit, and so were likely to say yes. There was, and continues to be, a very good uptake for the initiative, which participants report has generated a lot more confidence and effectiveness in cross-team engagement.


A caveat


Nudging has received a lot of positive press, and not least that Nobel prize, but it also faces some criticism. In its best form, it is influence towards a positive action. In its worst form, it is manipulation. What is positive influence to one is manipulation to another - it is not always clear cut when a nudge is ethical. There is no defined line. Influence is central to leadership, and yet somehow when we present a way of effecting influence which is backed up by neuroscience, then it is a little more problematic, as though we are moving puppets on strings. Leaders need to be very careful that they are challenging themselves and what they are doing, and that they are comfortable to be remaining on the side of ethics.


Consider the perspective of the devil’s advocate and whether you are still happy to action your nudge:

  • Does it have a positive organisational benefit?

  • Are you being deceitful?

  • Is anyone losing anything significant in the process?

The first one should be pretty easy, but if you are even close to answering ‘yes’ for the second two, as a leader, you might want to rethink.


In conclusion, assuming that a nudge is used in an ethical way, with the outcome of positive organisational action and with no collateral damage in the process, then nudging can be a really effective tool for leaders to improve their influence and effect positive change in their organization.



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