POINT OF VIEW

Rotman Management Magazine - - CONTENT - Dan Markovitz

WHEN YOU FIRST SEE THE FLIES, it’s a bit un­set­tling. Your first re­ac­tion is that the wash­room you are in is un­hy­gienic; but you soon re­al­ize that the flies in the uri­nals of the men’s room at Am­s­ter­dam’s Schiphol Air­port aren’t real: They are only im­ages etched into the porce­lain. How­ever, they are fa­mous enough to be fea­tured in the aca­demic lit­er­a­ture for both Eco­nomics and Psy­chol­ogy. As the New York Times re­ported, af­ter the flies were added to the uri­nals, ‘spillage’ on the men’s room floor de­creased by 80 per cent.

Ac­cord­ing to Nudge co-au­thor Richard Thaler, be­havioural econ­o­mist at the Univer­sity of Chicago, the ex­pla­na­tion is sim­ple: Men like to aim at tar­gets. Thaler says the flies are one of his favourite ex­am­ples of a ‘nudge’ — a harm­less bit of en­gi­neer­ing that al­ters peo­ple’s be­hav­iour in a pos­i­tive way, with­out ac­tu­ally re­quir­ing any­one to do any­thing:

To date, the most well-known nudges have been cre­ated in the con­text of larger so­cial is­sues. For ex­am­ple, Oopower lever­aged peer in­flu­ence to re­duce elec­tric­ity us­age by show­ing peo­ple how their power con­sump­tion com­pared to their neigh­bours; and Waters­mart Soft­ware did the same thing with wa­ter us­age in drought-stricken Cal­i­for­nia.

Other nudges aim to make a so­cially-de­sired be­hav­iour eas­ier: At the time of is­su­ing a driver’s li­cense, var­i­ous ju­ris­dic­tions have in­creased par­tic­i­pa­tion in or­gan donor pro­grams by hav­ing Depart­ment of Mo­tor Ve­hi­cles work­ers ask peo­ple if they want to reg­is­ter as a donor. Sim­i­larly, as Prof. Thaler and oth­ers have shown, em­ploy­ers have in­creased par­tic­i­pa­tion in re­tire­ment sav­ings plans by au­to­mat­i­cally en­rolling peo­ple, and forc­ing em­ploy­ees to ac­tively opt-out of the pro­gram.

Still other nudges ex­ploit well-known cog­ni­tive bi­ases, such as loss aver­sion. For ex­am­ple, at goal-set­ting web­site stickk.com, users set a per­sonal goal and sign a ‘com­mit­ment con­tract’. If they fail to meet the goal, they for­feit the money they pledged, and it is given to a friend or a char­ity.

Al­though nudges are most of­ten used in sit­u­a­tions that pro­mote so­cial wel­fare — or­gan do­na­tion, health, sav­ings, con­ser­va­tion, etc. — they are a pow­er­ful tool that can help deal with seem­ingly-in­tractable busi­ness prob­lems that be­devil a com­pany’s op­er­a­tions.

The bur­den of pro­cess­ing large vol­umes of email, for ex­am­ple, is a nec­es­sary evil that comes with the bless­ing of in­stant, free and easy com­mu­ni­ca­tion. But the in­fu­ri­at­ing plague of use­less ‘Re­ply All’ emails that clog in­boxes is

noth­ing less than Sa­tan-spawn. Telling peo­ple not to use ‘Re­ply All’ ex­cept when truly nec­es­sary doesn’t seem to work — even though every­one com­plains about those mes­sages, and it’s clearly in every­one’s best in­ter­est to stop send­ing them.

Fed up with the bur­den of this elec­tronic garbage and the in­ef­fec­tive­ness of sim­ply ask­ing peo­ple to think twice be­fore hit­ting ‘Re­ply All’, the CIO of the Nielsen Com­pany cre­ated a nudge by com­pletely re­mov­ing the but­ton from the com­pany’s Out­look tool­bar. Ac­tu­ally, this ex­am­ple might be closer to a ‘shove’: A nudge prob­a­bly would have moved the but­ton to an in­con­ve­nient po­si­tion on the tool­bar.

While we’re on the sub­ject of email, many peo­ple com­plain that it’s dif­fi­cult for them to carve out un­in­ter­rupted time for cog­ni­tively-de­mand­ing work. The in­ces­sant ding of in­com­ing emails, along with their own habit of in­ter­rupt­ing their work to check or send emails, makes it nearly im­pos­si­ble to fo­cus for long pe­ri­ods of time. Turn­ing off email alerts, and set­ting cell phone email apps to ‘fetch’ rather than ‘push’, is an el­e­gant nudge to keep peo­ple from re­spond­ing im­me­di­ately to all in­com­ing mes­sages.

One of my own con­sult­ing clients — frus­trated by the amount of time that his team was spend­ing on email — gave each per­son four poker chips for han­dling mail. Each chip was worth 30 min­utes in Out­look; and when all the chips were spent, peo­ple weren’t al­lowed to go back into their email.

Else­where, Mas­sachusetts Gen­eral Hos­pi­tal changed the eat­ing habits of both cus­tomers and em­ploy­ees at its hos­pi­tal cafe­te­ria. Lead­ers in the Depart­ment of Nu­tri­tion and Food Ser­vices ap­plied ‘traf­fic light la­bels’ — green for the health­i­est items, such as fruits, veg­eta­bles, and lean sources of pro­tein; yel­low for less-healthy items; and red for those with lit­tle or no nu­tri­tional value — to all items in the main hos­pi­tal cafe­te­ria. They also re­ar­ranged the dis­plays to put more health­ful items where they were most likely to be se­lected (e.g., bot­tled wa­ter at eye level, su­gar-laden drinks down be­low). Over the next two years, pur­chases of ‘green­light’ items in­creased 12 per­cent, while ‘red-light’ pur­chases dropped by 20 per cent; sales of su­gar-sweet­ened drinks alone fell by 39 per­cent.

Most or­ga­ni­za­tions be­moan the in­ef­fi­ciency of their meet­ings — they start late, they end late, and many of them don’t even have a clear ob­jec­tive. Even though Robert’s Rules of Or­der has been around since 1876 (and the rules aren’t all that com­pli­cated), they’re most of­ten ob­served in their breach rather than their ad­her­ence. Nudges, how­ever, can change meet­ing be­hav­iour with­out the need for lengthy memos or an­nounce­ments. At Google, the time re­main­ing in a meet­ing is pro­jected in four-foot high num­bers on the wall. Noth­ing fo­cuses the mind like the guil­lo­tine blade of a giant count­down timer.

A for­mer boss of mine locked the door of the meet­ing room at the ap­pointed start time — though of course, as pres­i­dent of the com­pany, he could get away with that. And one of my for­mer clients took ad­van­tage of the in­nate hu­man de­sire for pat­terns and con­sis­tency by putting a chart up on the wall show­ing whether his team’s weekly meet­ing started/ended on time (green dot) or was late (red dot). Once they had a string of green dots, no one wanted to be the per­son who broke the chain with a red dot. Another client was dis­ap­pointed with his sales team’s lack of fo­cus. They were work­ing hard, but the lead­er­ship wanted them to in­vest more ef­fort on ac­counts that weren’t car­ry­ing the full breadth of the prod­uct line (or the line at all). The vis­ual board they put on the wall was an ef­fec­tive nudge in redi­rect­ing their sales ef­forts.

Nudges can also be a pow­er­ful way of cre­at­ing and re­in­forc­ing the cor­po­rate cul­ture you de­sire. Grey Ad­ver­tis­ing wants peo­ple to be in­no­va­tive and to take risks—not al­ways easy to do in a large com­pany with lay­ers of man­age­ment. How­ever, its quar­terly Heroic Fail­ure Award—which comes com­plete with a two-foot high tro­phy—cel­e­brates fail­ures of dar­ing and au­dac­ity. The award—and the cer­e­mony around it—is re­ally noth­ing more than a nudge that re­duces the emo­tional stakes of mak­ing an er­ror.

For or­ga­ni­za­tions com­mit­ted to pur­su­ing a lean ap­proach, it is es­sen­tial to elim­i­nate the fear that comes with sur­fac­ing prob­lems. And al­though Toy­ota doesn’t use the term, the com­pany uses nudges around so­cial norms to cre­ate that kind of cul­ture, as epit­o­mized by the ex­pe­ri­ence of Mike Hoseus, au­thor of Toy­ota Cul­ture. When he first joined Toy­ota in 1987, Mike was sent to work at a plant in Ja­pan for a month of train­ing. He didn’t speak Ja­panese, and his co-work­ers didn’t speak any English. One day on the line, he slipped with a tool and scratched the in­side of a fender, in a place that no one on the pro­duc­tion line and no cus­tomer would ever no­tice. In­tel­lec­tu­ally, he knew that he was sup­posed to re­port any prob­lems to his team leader, but he was afraid to do so. No one saw the mis­take, and he didn’t want to tell any­one that he screwed up. Hoseus writes:

Af­ter a lit­tle hes­i­ta­tion, I got paranoid and pulled the an­don [emer­gency stop] cord, and the team leader came over and taught me how to do it right. We got the scratch fixed, and the line went back to work. Shortly af­ter, at a daily meet­ing, the floor work­ers gath­ered with their line man­agers to dis­cuss any prob­lems dur­ing the shift. Af­ter a brief hud­dle, [the line man­agers] all started pat­ting me on the back and con­grat­u­lat­ing me, and the trans­la­tor said the su­per­vi­sor had said, “Thanks for ad­mit­ting your mis­take.”

To cre­ate a cul­ture where peo­ple are un­afraid to sur­face their er­rors, fol­low Toy­ota’s ex­am­ple and cre­ate nudges where peo­ple ac­tu­ally thank the er­ror-maker for their com­mit­ment to good work. Nur­tur­ing a so­cial norm that ex­plic­itly cel­e­brates hon­esty and high qual­ity will make it a lot eas­ier to do the right thing.

The cel­e­brated nudges in the world of Be­havioural Eco­nomics are usu­ally pub­lic sec­tor, or large-scale ini­tia­tives aimed at im­prov­ing so­cial wel­fare. How­ever, as in­di­cated herein, with a lit­tle cre­ativ­ity, the prin­ci­ples un­der­ly­ing these nudges can also be used to im­prove per­for­mance on both the in­di­vid­ual and the or­ga­ni­za­tional level.

Daniel Markovitz is the au­thor of Build­ing the Fit Or­ga­ni­za­tion: Six Core Prin­ci­ples for Mak­ing Your Com­pany Stronger, Faster, and More Com­pet­i­tive (Mcgraw Hill Ed­u­ca­tion, 2015) and the prin­ci­ple of Markovitz Con­sult­ing. He has held se­nior po­si­tions at Adi­das, CNET and Asics Tiger.

At Google, the time re­main­ing in a meet­ing is pro­jected in four-foot high num­bers on the wall.

A ‘fly’ in the men’s room at Schiphol Air­port in Am­s­ter­dam.

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