How do you stop a profligate person from over-spending? You could cut their expenses allowance or withdraw signing power. Or you could try something a little more benign — say, drawing a frown on their cheques, perhaps.
I’ve picked a facile example, but this is the idea behind a book creating a big buzz here — ‘Nudge: Improving Decisions About Health, Wealth and Happiness’, by University of Chicago professors Richard Thaler and Cass Sunstein.
The basic premise is that nobody likes being ordered around, but people cannot be relied upon to act in their own best interests.
As Richard Reeves, Demos’s director, explains in his review of the book, “homo economicus”, or “Rational Economic Man”, is a myth. We are, instead, “ill-informed weak-willed and lazy”, more likely to go for instant gratification today than ‘jam tomorrow’.
So we need a little nudge in the right direction if we are to, say, put money into pension schemes. We’ll be put off by coercion — hence the idea of drawing smiley faces on a miser’s banknotes to encourage spending, or Schipol Airport’s decision to paint ‘targets’ onto men’s urinals to improve their aim and keep the floors clean.
As we are also heavily influenced by our peers, the trick is to use their behaviour to influence a decision. If you want to encourage people to consume less energy, it’s more effective to compare their use with their neighbours’ than insist they cut back.
Does it apply to business, too? Some corporate practices already have a nudge-like approach. Look at benchmarking — it uses peer performance to influence strategic decisions. Viral marketing and social-networking, too, capitalise on the power of peer persuasion.
Workplace health schemes such as those set up by BT are another source of benign intervention and it’s at policy level that there’s been most interest in Thaler and Sunstein’s theories in the UK.
Whether nudge applies to managers is another matter. Yes, it makes sense to incentivise good performance — but managers have espoused this idea for a while now.
Beyond that, there’s that tricky line between intervention and interferance. In the book, Thaler and Sunstein’s suggestion of a cooling-off period to guard against quickie marriages is overbearing. If you prevent mistake-making in business, you can thwart learning as well as the chances of accidental invention.
Paternalism is not a word well suited to the modern workplace, even in family businesses. There’s a danger of infantilising people — becoming a Mary Poppins manager. What’s more, if Thaler and Sunstein are right, the minute someone feels they are being manipulated or ‘manhandled’ into doing something, they’ll dig their heels in. Then it’ll take more than a nudge to encourage them.
Noting the effectiveness of one-word titles a la ‘Blink’, Reeves comes up with a next-seller of his own: ‘Wink: How Small Signals Transmit Big Messages’.
How about: ‘Leap: the Power of Uninformed Decisions’? or ‘Blip: the Little Mistakes That Spell Big Trouble.’
Any more one-word title suggestions?
