Nudge Theory Explained with Examples

hello and welcome to today's lesson where we're looking at nudge theory so nudge theory is based on the idea that people can be nudged to make the right choice without coercing them or restricting their freedom of choice nudging differs from other ways to achieve compliance because the individual maintains their freedom of choice and is in control of any decisions they make nudge theory was popularized in the 2008 book nudge by richard thaler and cass sunstein now if you're watching this video you probably think of yourself as a logical and rational individual making independent choices to solve problems as they arise throughout your working day but is the truth actually a little more complex psychologists have long known that humans make decisions using two systems the automatic system a fast intuitive system providing an automatic or emotional response and the reflective system a slower system requiring deliberate conscious thought now when you learn to drive you'll use the reflective system to help you learn the new skill but once you've mastered driving you will hand the skill over to the automatic system so it no longer requires much thought now it takes a lot of effort to use your reflective system and as humans we're inherently lazy so we all try to use our automatic systems where possible now one problem with using our automatic system to make decisions is that we're inclined to make irrational decisions because of deep rooted biases such as the fear of standing out from the crowd you can think of biases as heuristics or rules of thumb to help you make quick decisions now i want you to quickly read the text contained in the following triangle now the majority of people don't notice the second the when they read that text for the first time and if you did the same well that's because you're using a mental shortcut to read the text rather than using your slower deliberate reflective system now the purpose of this example is simply to show that every one of us has cognitive biases salar and sunshine list five biases that prejudice our decision making they are anchoring availability heuristic representativeness heuristic status quo bias and herd mentality let's take a look at each so anchoring occurs when you rely too much on one piece of information when making plans or decisions you interpret new information from the reference point of your anchor instead of viewing it on its own merits so for example suppose you're shopping in a fancy store and the first t-shirt you look at costs one thousand dollars if the next t-shirt you look at costs one hundred dollars you're prone to thinking of it as cheap even if you'd never normally pay anywhere near that amount for a t-shirt in this case you've been anchored by the 1 000 price tag next is availability heuristic now this is a mental shortcut whereby you rely too much on immediate examples that spring to mind when evaluating a topic so for example although car travel has higher mortality than air travel statistically many people who happily undertake car journeys can be scared of plane travel and that can be because plane crashes are more widely covered in the media and are thus more easily recalled than car crashes next we have representativeness heuristic now this bias is a mental shortcut you use when estimating probabilities you compare the outcome under consideration to an existing prototype in your head which is what you think is a typical example of a particular event or object you assume the outcome and your prototype are more closely related than they actually are so for example consider this sentence lucy is 26 and has just graduated from harvard business school with an mba where she was also passionate about gay rights now based on that sentence is it more likely that a lucy works in a bank or b lucy works in a bank and is actively involved in the gay rights movement now most people opt for answer b but this is incorrect in fact answer b is a subset of answer a and because of this cannot be more probable than answer a next we have status quo bias now this is an unconscious bias towards the current state of affairs where any move away from this is perceived as a loss this cognitive bias prefers inaction to action even when action is the more favorable decision so for example imagine you own a small company with a considerable cash surplus sitting in a deposit account rather than invest the money to grow your business you stick with the default option of leaving the money where it is in this case it's easier for your automatic system to decide to do nothing than for your reflective system to put in the work and determine how to invest the money so finally herd mentality this is a mental shortcut you use whereby you copy and follow what others are doing so for example suppose you're walking down an unfamiliar street looking for a restaurant to have dinner you see a virtually empty restaurant but decide to keep looking before eventually selecting a busier restaurant your selection has been made because you've assumed the restaurant you've chosen is better because there are more people there this is herd mentality bias in action so the power of nudge theory is that it taps into these irrational biases and heuristics to nudge you towards making a particular decision and it does this without resistance and confrontation common to other more autocratic directive methods of changing people's behavior so let's take a look at two examples of nudges from the workplace so firstly desired behavior we want is to encourage employees to meet new people outside of their immediate team and a possible nudge to do that is to create a single cafeteria for the entire organization with long tables to encourage people from different departments to sit together and strike up conversations now in the next example the desired behavior is to encourage employees to print less reducing ink and paper usage and the nudge we might select is to remove printers from all but one room in the building everybody can use that printer but most will have to walk some distance to collect their printout and that's likely to reduce the amount of printing they do now if you've watched this far you probably think that nudge theory sounds great in theory but how do you use it in practice for this we offer the following simple nudge theory process to help you create your own nudges now when using this process you'll essentially become a choice architect responsible for setting the context in which your people make decisions so step one is to define what it is you're trying to achieve and why don't aim initially for a huge goal instead try to start small and build on any success you have step two is to brainstorm if any obstacles or existing negative nudges prevent your team from exhibiting your desired behavior step three is to consider the benefits to your employees of making this change also consider asking your employees to participate in creating the nudge step four if feasible remove any obstacles and existing negative nudges you have identified in step two step 5 is to brainstorm to identify a set of possible nudges leveraging cognitive biases to make it easy for people to display the right behavior step 6 is to select one or more nudges and begin nudging and finally step seven is to measure success against your desired outcome and adapt as necessary remember to take on board feedback from your employees in this step so let's take a look at a very simple example of how you might use this seven-step process so imagine you're a senior manager responsible for an office based team of employees you want to increase productivity in particular by increasing the amount of deep concentrated work that gets done let's take a look at what each step of the nudge theory process might look like for this example so first define your outcome well the outcome is to increase productivity by enabling people to carry out more deep work next we have identify obstacles and unhelpful existing nudges well distractions are everywhere from people initiating office chats directly to a constant stream of optional meetings for people to attend next we want to consider things from the employees perspective well it's actually annoying for employees when they're trying to concentrate and yet there are so many distractions it probably impacts their job satisfaction too so the fourth step is remove obstacles and existing negative nudges now in this example things are complex it's challenging and we're just not able to do that the fifth step is to brainstorm your nudge and you identify two nudge ideas now the first is introducing partitions between the desks to make it harder for employees to initiate chit chat but you rule this out after all it isn't actually a nudge because it's not optional and it would make it harder in general for all employees to converse which you don't want so the second option you come up with is to introduce a trophy now when a person puts the trophy on their desk it means they are trying to do deep work and should not be disturbed under any circumstance this idea builds on the herd mentality bias once some of the teams start observing the rules of the trophy the rest should follow so step six is to start nudging and that just involves telling your team about your trophy idea step seven is to review and adapt so the team is using the trophy as intended however you get some feedback but it's still hard to concentrate as people are striking up conversations around them while they're trying to do their deep work so in that case you train the team that when someone has the trophy on their desk they shouldn't really strike up conversations with others in close vicinity they should move a little bit away to a different location so i want to just briefly touch upon how nudge theory applies to change management so whilst nudge theory can be used to change people's behavior it isn't a fully fledged change management model instead it is a tool that can be used within any formal change management model such as the ad car change management model or cutter's eight-step change model to nudge employees towards the desired behaviors so in summary nudge theory is based on the idea that people can be nudged to make the right choice without coercing them or restricting their freedom of choice and it leverages cognitive biases to make this happen so that's it for this lesson really hope you enjoyed it and i look forward to speaking to you again soon