Behavioral Economics: HR’s Next-Generation Role
If I were to describe life in 2016 with one word, it would be “distracted.”
Josh Bersin, principal and founder of Bersin by Deloitte, agreed with me when we spoke via phone: “Because of all the tech we have – the mobile phones, emails, text messages, etc. – people have less time to do things well. They ignore a lot of things they normally would have done.”
Bersin is referring to the concept of the “overwhelmed employee,” an idea that Bersin by Deloitte and its parent company, Deloitte, have explored thoroughly. Overwhelmed employees are bad for business in general, but they also pose a significant challenge to HR in particular.
This is because many of the things that overwhelmed employees ignore turn out to be important HR paperwork.
Often, HR responds to the situation by doubling down – by constantly pressuring employees to do the things they haven’t done.
This approach fails for a couple of reasons. On the one hand, it leaves a bad taste in people’s mouths, as Bersin explains: “One of the problems that companies have with HR all the time is that the HR department is basically the police, running around and telling everyone what to do.”
People don’t generally respond well to this sort of treatment, which means they’ll continue to put off those all-important forms.
But the second and more important reason why the HR-as-office-police-force approach fails is because it simply doesn’t work. People don’t do things just because you tell them to.
Faced with overwhelmed employees, HR departments should try something else. They should, according to Bersin, turn to behavioral economics for help.
“[Running around and telling people what to do] is not HR’s job,” Bersin says. “HR’s job is to design environments that encourage people to do the right thing. That’s a subtler and more complex job, but it’s a more powerful job, too.”
I Won’t Do What You Tell Me – But I’ll Do What You ‘Nudge’ Me
HR departments, Bersin says, operate based on the idea that people will do what you tell them to do.
“A lot of the things that happen in HR are directed activities designed by HR departments on behalf of management, and we expect people to do them because they have been told to do them,” Bersin says. “So you tell someone to fill out a form, come to an interview, answer these questions, take this course, log your hours – whatever it is.”
HR also tends to think – as we all do – that people will do things that are good for them. So it seems like telling an employee to take a particular training course should work right? After all: HR told them to take it, and the course will be good for their career.
The problem is that people rarely act as rationally as we’d expect them to, as this Deloitte Review article points out – and when people are overwhelmed, they are even more prone to let reason fall by the wayside.
Bersin gives a good example of how people tend to act in the real world: “If I say to you, ‘Don’t come in the front door, because there is construction overhead and someone might drop something on your head,’ you would theoretically not come in the front door. However, it may be that it’s cold or rainy, and the front door is right there, and the side door is a long way away, so you say, ‘To heck with them, I’m going in the front door.’”
In this situation, it would be much safer – and more rational – to use the front door. And yet, the cold and the rain seem to be more pressing matters than the very real risk of serious bodily harm. Who among us has not made a risky decision for similarly weak reasons before?
Whereas HR assumes that we will do things that are good for us because we are told to do them, behavioral economics realizes that this isn’t always the case. Instead, behavioral economics takes a different approach, using “nudges” or suggestions to encourage people to do things that are good for them – even if they would not normally do those things.
Nudges, Bersin says, “are not orders. They are suggestions that, in some subtle way, make you want to do something.”
According to Bersin, the U.S. government has been using nudges to great results.
“For example, if you send someone a tax bill, and on the bill it says ’87 percent of your neighbors have paid their taxes already,’ it’s much more likely that the person will pay it than if you just use a big red stamp that says ‘Overdue,’” Bersin explains.
Behavioral Economics in Action
So, how can HR put such behavioral nudges into practice in its own efforts? We can answer that question by considering another example that Bersin presents:
“If you give somebody a 401k plan and give them 87 options, most people get overwhelmed by the number of choices, and they don’t actually join the 401k at all. But if you give them three options, and one of the options is recommended for them, in most cases, they will pick it. And if you pre-enroll them and don’t even make it necessary to pick an option at all, then roughly 99 percent of the people just go with it.”
Bersin also points to Google’s cafeterias as illustrations of behavioral nudges in action:
“They gave everyone free food for many years at Google. People started to get entitled and take food home. People were putting on weight, and they were complaining there was too much food and Google wasn’t being healthy. So Google put out a new policy that you weren’t supposed to take food home, and that Google would only serve healthy food.
“Well, all the employees got mad. They said, ‘Wait, this is our food. What right do you have to tell us what to eat?’
“So, Google took the fattening food and put it on shelves that made it harder to reach, and they put the healthy food where people were normally going to get their cafeteria food. That’s a nudge. They didn’t tell people to eat the healthy food, and they didn’t take the bad food away, but they made it harder to get.”
HR departments at other organizations can bring behavioral economics into their operations by remembering two simple rules: It’s always better to simplify things, and you should let the crowd lead the way.
These principles are especially effective in the recruiting process.
For example, Bersin says it’s best to simplify the application process as much as possible: “Give the candidate one thing to do to apply. Ask them to answer three questions on the application – not four, not five.”
Bersin recognizes that this calls for some additional work on the HR and recruiting team’s end: “You do have to figure out which questions are the most important,” he says. Still, simplified applications are well worth the effort because they will encourage more candidates to apply – especially those overwhelmed candidates who feel constantly pressed for time.
Crowd-following can lead to more efficient recruiting processes, too. Instead of chasing candidates down for information, HR and recruiting teams can nudge candidates to submit all their materials in a timely fashion.
“So, rather than saying, ‘Please take a photocopy of your driver’s license and fax it to this number,’ you might say something like ’92 percent of our candidates fax their driver’s licenses to this number within the first two days of applying,’” Bersin explains. “So, you’re not saying ‘You have to do this.’ You’re just saying, ‘Most people do it, so maybe, if you want to get a job here, you should do it, too.’”
The fact is that we’re all overwhelmed these days. Employees, HR pros, recruiters, candidates: We’re all subject to the always-on nature of our hyperconnected world. Often, this leads us to shirk some of our duties – to skip an engagement survey here, abandon a job application without submitting it there. But HR and recruiting teams can combat this state of affairs simply by adopting the tenets of behavioral economics.
Plus, using nudges will also help HR and recruiting departments themselves feel less overwhelmed. Why chase employees and candidates down when you can just give them a gentle push in the right direction?