|Picture courtesy of Villains WIki|
I recently wrote a post about Dan Ariely’s fascinating work on behavioural science, Predictably Irrational. You can read the post here, summarizing some of the key findings from the book, but after receiving several questions about how to operationalize this information I decided to write a follow up post.
1. Everything’s relative: Humans understand and navigate the world by making comparisons. That’s why when executive salaries were first published they skyrocketed rather than becoming more normalized, resulting in diverse organizational disfunctions. It’s also why forced ranking can backfire in a high performing team. From an HR perspective, it’s naïve to assume people won’t make comparisons regarding their own compensation, benefits, career progress, etc. It’s therefore important to establish a perception of fairness in the organization, i.e. not equality per se but equal opportunity with a clear path to the next level of pay or responsibility. I recommend investing in a visual career path as an employee branding and coaching tool (example below), because it creates an immediate frame of reference that helps people understand where they are on the journey and how to progress to the next level. To promote higher engagement with the tool consider making it interactive, for example using Visme.
|Courtesy of Amoria Bond|
2. Emotions cloud our judgement even more than we realize: People like to think of themselves as fair and impartial but in fact most people are ruled most of the time by their own emotional biases. That’s why a great theory tends to break down in practice when it encounters the personal agenda, why nepotism exists, why people believe false information, and why the overarching goal of talent management as defined by Cornell University is to reduce the impact of human frailty (or bias) in decision making. Although self-serving behaviour limits company growth by undermining people and trust, many organizations inadvertently incentivize confidence over substance and being seen over being impactful. Whereas truly innovative companies stamp out undermining behaviours and recognize leaders who put team, customer or business first.
3. Don’t confuse social norms with market norms: Compassionate and authentic leadership can inspire great things from teams, and most people want to help others and be part of something greater than themselves. So how do we explain bullying, marginalizing and self-optimizing behaviour in the workplace that prevent people from contributing as much as they could in a more supportive environment? Amongst other reasons – including company culture - it turns out that monetary transactions bypass the helpfulness impulse and activate a ‘market norm.’ People behave competitively and won’t go the extra mile for a low reward when market norms are in operation. If you’d like to learn more about how applied social norms such as recognition empower employees and drive higher performance, I recommend The Power of Thanks, co-authored by my former Compensation Café colleague Derek Irvine.
4. Expectations shape perception: Expectations colour our experiences, which is why two people can share the same experience but describe it completely differently. Employee engagement research shows that people who feel appreciated and recognized at work are also more likely to enjoy their jobs, trust their managers and believe they are compensated fairly. It’s almost like there’s no downside to this whole recognition thing…
5. Free has magical properties: People can’t seem to resist the lure of the freebie, which creates all sorts of interesting possibilities for creative total compensation packages. One of the companies I worked for that was consistently voted a best place to work in the competitive Bay Area paid a bit less than competitors but offered free Noah’s bagels and cream cheese two days a week. You can’t beat a good schmear.
6. It’s hard to let go: People like to keep all the options on the table for as long as possible, which is why limited availability or putting a time limit on options can help create clarity and spur people into action. When preparing for significant organizational change it’s important to give people time to prepare, but it’s equally important to ‘burn your ships’ and start working in the new way. Too often, people and organizations get stuck between old and new, spreading valuable creativity too thinly across too many initiatives. My recent blog post on failure and innovation spotlights the role of leadership in focusing creative energy.
7. First choice results in a better experience: The person who raises their hand first is in a unique position to set the tone or volunteer for a choice assignment, while less assertive voices may be unheard or ignored, leading to less satisfaction in the outcome. A more inclusive strategy is to ask everyone to write down their thoughts and pick someone at random to share their notes first without interruption until everyone has had a chance to speak. This tactic has the advantage of enabling introverts to have an equal share in the discussion, which doesn't usually happen.
|Picture courtesy of Impulse|
So there you have it: interactive career paths, recognition programs, free bagels, clear priorities, and more inclusive discourse can help put behavioural economics to work in your organization.
Thanks for reading and as always, comments and additional suggestions are welcome.