Six behavioral economics lessons for the workplace

Behavioral Economics
for the workplace
lessons
from

2 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved.
Humans
are not
perfect

We overgeneralize from our
personal experience, often
neglect logical analyses,
and are generally
overconfident in
our judgments

These biases can impact decisions…
…more than we may realize
regulatory
management
economic

Concepts of modern
psychology and
behavioral economics
offer us tools to better
shape programs,
policies and products in
a human-centric spirit

Here are five lessons that illustrate
how leveraging the principles of
can improve your workplace
Behavioral
Economics

7 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved.7 Deloitte University Press | 5 lessons from Behavioral Economics for the workplace | @DU_Press #DeloitteReview Copyright © 2016 Deloitte Development LLC. All rights reserved.
Money can’t buy
you innovation
1

As a result, monetary influences often aren’t enough to
cultivate innovation and creative thinking.
Individuals are often motivated by professional pride, fairness,
and the greater good of a community. Even when those
motivators inhibit our pure economic earnings potential.

Leaders at any level can begin to instill an innovative mindset by
consistently incorporating three behavioral concepts into their
leadership style:
To learn more, read “Nothing for money: A behavioral perspective on
innovation and motivation” from Deloitte Review Issue 18
Download the article
Recognize the
accomplishments of
your people
Give your employees
permission to fail
Treat your employees well,
and they will reciprocate

Quick decisions
aren’t always the
best decisions
2

However, prematurely switching to an execution-focused mindset
may lead to excessive risk-taking.
During pre-decision making, individuals adopt a deliberative
mindset, where they evaluate information to reach their goal.
In the post-decision stage, an implementation mindset takes
over and individuals become committed to a course of action.
implementation
mindset
deliberative
mindset
decision

To learn more, read “Crossing the mental Rubicon: Don’t let
decisiveness backfire” from Deloitte Review Issue 18
Executives should consider the following tactics before letting
their mindset cross from deliberative to implemental:
Conduct a “premortem”
of available choices
Focus on understanding
rather than “go/no go”
decisions
Consider techniques like
“devil’s advocate” or
“dialectical inquiry”
Hold off on
implementing project
management tools
Pay attention to
discordant data
Consider bringing
unbiased outsiders into
the conversation

Better HR through
behavioral
economics
3

The time has come for a fresh look at evidence-based HR,
founded on two key premises:
HR practices, policies, and
programs should be designed
to reflect our best
understanding of human
psychology.
HR practices, like all business
programs, should be tested
and validated.

To learn more, read “HR for humans: How behavioral economics can
reinvent HR” from Deloitte Review Issue 18
The HR domain should embrace three premises that
correspond to the major themes of behavioral economics:
Play Moneyball: When it comes to hiring and evaluating
employees, even simple predictive models can run circles
around unaided professional judgment
Leverage intrinsic motivation: Traditional economic
incentives can actually crowd out intrinsic motivations of
high performance, innovation, and ethical behavior
Nudge your colleagues: Smart choice architecture can
reduce cognitive overload and help employees make
better decisions

Overcoming mental
bias against
additive
manufacturing
4

Process change, fear, risk and skepticism are just some of the
behavioral hurdles for some engineers.
Rather than shifting to new design approaches when the
situation warrants it, engineers often revert to well-worn,
comfortable design paradigms, missing opportunities where
additive manufacturing can create value.

As companies continue to consider adoption of additive
manufacturing (AM) beyond conventional manufacturing,
managers may want to consider some of the following actions:
To learn more, read “3D opportunity for engineers: Using behavioral
science to help build a new mindset” from Deloitte Review Issue 18
Assess your own biases
Establish a purpose for
adoption
Let change champions
explore AM’s possibilities
Create an action plan
with manageable stages
and precise solutions
Forge relationships
throughout the AM
ecosystem

Using behavioral
research to nudge
compliant
behavior
5

Instead, by implementing smart, subtle communication
changes, the New Mexico Department of Workforce Solutions
was able to help its customers more accurately report information
vital to the agency’s operations.
Government agencies don’t always put themselves in the shoes of
their customers. As a result, regular communication methods
often fail to achieve the desired results.

To learn more, read “Nudging New Mexico: Kindling compliance among
unemployment claimants” from Deloitte Review Issue 18
If you’re looking to induce more compliant behavior in a process,
consider these four dimensions of behavioral communications:
Know your audience
Make sure the system
is built for humans
Value through
communication does
not have to be a huge
undertaking
Consider how to
gently nudge people
in the right direction

Slow thinking can
lead to better
thinking
6

Cognitive behavioral therapy (CBT) can help people recognize the
circumstances around their negative thoughts and, consequently,
slow them down to engage in more positive behaviors.
We couldn’t function without fast thinking—the autopilot
decisions that guide us through many ordinary situations. But fast
thinking can lead us to blurt out the wrong thing in a meeting,
make a poor strategic decision, or turn self-destructive.
fast thinking slow thinking
automatic thoughts we
continually process
complex, deliberate
thought processes

Borrowing from what we know from behavioral science research
and CBT practices, we can focus on several practices:
To learn more, read “Think slower: How behavioral science can improve
outcomes in life and the workplace” from Deloitte Review Issue 18
Identify the moments in
which fast thinking
betrayed you in the past
Access things that put
you in a positive mood
Know your limits and
give your mind a break
Practice analyzing
stressful scenarios can
help enhance thought
processes for future
occasions

Applying these six lessons can help you put
behavioral economics to work
People are motivated to be
innovative by intrinsic
values, not money Don’t cross over to an
implementation
mindset too quickly
Human resources
should be
designed with
“Humans” (not
“Econs”) in mind
Don’t let fear of the
unknown lead to missed
opportunities
Slow down fast
thinking to avoid
poor strategic
decisions
Behavioral research
can be used to nudge
compliant behavior

Share your thoughts with the hashtag #DeloitteReview
Follow @DU_Press on Twitter
Read more from our special section on Behavioral
Economics and Management in Deloitte Review Issue 18

Meet the authors
JOSH BERSIN
founded Bersin & Associates,
now Bersin by Deloitte, in 2001
to provide research and advisory
services focused on corporate
learning
SHANIL EBRAHIM
data science lead in the Deloitte
Strategic Analytics & Modelling
practice in Toronto, Canada
JAMES GUSZCZA
US chief data scientist for
Deloitte Consulting LLP
ALEXANDER BORSCH
director of research, Deloitte
Germany, Deloitte & Touche
GmbH
NICOLAI ANDERSEN
partner with Deloitte Consulting
GmbH and the Innovation leader
for Deloitte in Germany

Meet the authors
TIM MURPHY
research manager with Deloitte’s
Center for Integrated Research.
His research focuses on issues
related to behavioral sciences
and their impact on business
management.
KELLY MONAHAN
manager with Deloitte’s Center
for Integrated Research. Her
research focuses on the impact
of behavioral economics on
talent and leadership within
organizations.
MICHAEL GREENE
senior manager and data
scientist with Deloitte
Consulting LLP
JOY FOREHAND
deputy cabinet secretary of the
New Mexico Department of
Workforce Solutions. JOHN FORSYTHE
director with Deloitte Consulting
LLP. He works with client
leadership of large organizations
to drive sustainable, culture-
enabled, enterprise-wide changes

Meet the authors
BRENNA SNIDERMAN
senior manager with Deloitte’s
Her research focuses on the
application of advanced
technologies in manufacturing.
JEFF SCHWARTZ
principal with Deloitte
Consulting LLP, is the global
Human Capital leader for talent
strategies and marketing,
eminence, and brand
MICHAEL ROBERTO
Trustee Professor of
Management at Bryant
University in Smithfield, RI. His
research, teaching, and
consulting focus on leadership.
DEREK PANKRATZ
research manager with Deloitte’s
His research focuses on the
confluence of emerging
technological and social trends
across industries.

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Six behavioral economics lessons for the workplace

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