2015-05-05 14:45:11
John BeshearsFrancesca Gino
All employees, from CEOs to frontline workers, commit preventable mistakes: We
underestimate how long it will take to finish a task, overlook or ignore
information that reveals a flaw in our planning, or fail to take advantage of
company benefits that are in our best interests. It s extraordinarily difficult
to rewire the human brain to undo the patterns that lead to such mistakes. But
there is another approach: Alter the environment in which decisions are made so
that people are more likely to make choices that lead to good outcomes.
Leaders can do this by acting as architects. Drawing on our extensive research
in the consulting, software, entertainment, health care, pharmaceutical,
manufacturing, banking, retail, and food industries and on the basic principles
of behavioral economics, we have developed an approach for structuring work to
encourage good decision making.
Our approach consists of five basic steps: (1) Understand the systematic errors
in decision making that can occur, (2) determine whether behavioral issues are
at the heart of the poor decisions in question, (3) pinpoint the specific
underlying causes, (4) redesign the decision-making context to mitigate the
negative impacts of biases and inadequate motivation, and (5) rigorously test
the solution. This process can be applied to a wide range of problems, from
high employee turnover to missed deadlines to poor strategic decisions.
Understand How Decisions Are Made
For decades, behavioral decision researchers and psychologists have suggested
that human beings have two modes of processing information and making
decisions. The first, System 1 thinking, is automatic, instinctive, and
emotional. It relies on mental shortcuts that generate intuitive answers to
problems as they arise. The second, System 2, is slow, logical, and deliberate.
(Daniel Kahneman, winner of the Nobel prize in economics, popularized this
terminology in his book Thinking, Fast and Slow.
Each of the two modes of thinking has distinct advantages and disadvantages. In
many cases, System 1 takes in information and reaches correct conclusions
nearly effortlessly using intuition and rules of thumb. Of course, these
shortcuts can lead us astray. So we rely on our methodical System 2 thinking to
tell us when our intuition is wrong or our emotions have clouded our judgment,
and to correct poor snap judgments. All too often, though, we allow our
intuitions or emotions to go unchecked by analysis and deliberation, resulting
in poor decisions. (For a look at how both modes of thinking can cause
problems, see Outsmart Your Own Biases. )
Overreliance on System 1 thinking has another negative effect: It leads to poor
follow-through on plans, despite people s best intentions and genuine desire to
achieve their goals. That s because System 1 tends to focus on concrete,
immediate payoffs, distracting us from the abstract, long-term consequences of
our decisions. For instance, employees know they should save for retirement,
yet they rarely get around to signing up for their 401(k) plans. (A survey
conducted in 2014 by TIAA-CREF found that Americans devote more time to
choosing a TV or the location for a birthday dinner than to setting up a
retirement account.)
We do not mean to suggest that System 1 should be entirely suppressed in order
to promote sound decisions. The intuitive reactions of System 1 serve as
important inputs in the decision-making process. For example, if an investment
opportunity triggers a fearful emotional response, the decision maker should
carefully consider whether the investment is too risky. Using System 2, the
emotional response should be weighed against other factors that may be
underappreciated by System 1 such as the long-term strategic value of the
investment.
Engaging System 2 requires exerting cognitive effort, which is a scarce
resource; there s simply not enough of it to govern all the decisions we re
called on to make. As the cognitive energy needed to exercise System 2 is
depleted, problems of bias and inadequate motivation may arise.
Define the Problem
Not every business problem should be tackled using behavioral economics tools.
So before applying them, managers should determine whether:
Human behavior is at the core of the problem.
Certain problems employee burnout, for instance can be resolved by changing the
way people perceive and respond to a situation. Others are fundamentally
technological in nature for example, the lack of scientific knowledge needed to
create a new drug for treating a disease. Those problems are unlikely to be
solved by applying behavioral economics tools unless addressing them involves
changing human behavior (for example, encouraging teams of scientists to share
their discoveries in order to develop the drug).
People are acting in ways contrary to their own best interests.
Most behavioral economics tools gently guide people to different choices. They
will be most effective in situations where they encourage people to switch from
choices that are contrary to their interests to those better aligned with them.
The problem can be narrowly defined.
Sometimes all-encompassing change is required to shake up an organization. But
in many instances, complex organizational problems can be broken down into
smaller, more manageable pieces.
Consider a large U.S. retailer s efforts to rein in health care costs without
adversely impacting employees health, which one of us (John) studied in
collaboration with James Choi, David Laibson, and Brigitte Madrian. The company
identified one piece of the problem: the high cost of the subsidies it paid for
employees prescription drugs. Working with the drug plan administrator, the
retailer narrowed the problem further and focused on encouraging employees to
switch from picking up their prescriptions at pharmacies to having them mailed
to their homes. That shift would save both the company and employees money,
because prescriptions can be processed more cheaply at a large distribution
facility.
Behavioral economics techniques were appropriate in this case (we ll describe
later which ones the retailer used) because the problem was narrowly defined
and involved employees not acting in their own best interests: Pharmacy pickup
was less convenient than home delivery, more expensive, riskier (the error rate
in filling mail-order prescriptions is lower), and made employees more prone to
lapses in their treatment plan.
Diagnose Underlying Causes
There are two main causes of poor decision making: insufficient motivation and
cognitive biases. To determine which is causing the problematic behavior,
companies should ask two questions: First, is the problem caused by people s
failure to take any action at all? If so, the cause is a lack of motivation.
Second, are people taking action but in a way that introduces systematic errors
into the decision-making process? If so, the problem is rooted in cognitive
biases. These categories are not mutually exclusive, but recognizing the
distinction between them is a useful starting point.
Common Biases that Affect Business Decisions
Many cognitive biases impair our ability to objectively evaluate information,
form sound judgments,
and make effective decisions. These biases can be particularly problematic in
business context.
ACTION-ORIENTED BIASES
Excessive optimism: We are overly optimistic about the outcome of planned
actions. We overestimate
the likelihoud of positive events and underestimate that of negative ones.
Overconfidence: We overestimate our skill level relative to others' and
consequently our abiliy to affect
future outcomes. We take credit for past positive outcomes without
acknowledging the role of chance.
BIASES RELATED TO PERCEIVING AND JUDGING ALTERNATIVES
Confirmaition bias: We place extra value on evidence consistent with a favored
belief and not enough
on evidence that contradicts it. We fail to search impartially for evidence.
Anchoring and insufficient adjustment: We root our decisions in an in initial
value and fail
to sufficiently adjut our thinking away from that value.
Groupthink: We strive for consersus at the cost of a realistic appraisal of
alternative courses of action.
Egocentrism: We focus too narrowly on our own perpective to the point that we
can't imagine how others
will be affected by a policy or stategy. We assume that everyone has access to
the same information we do.
BIASES RELATED TO THE FRAMING OF ALTERNATIVES
Loss aversion: We feel losses more acutely than gains of the same amount, which
makes us more
risk-averse than a rational calculation would recommend.
Sunk-cost fallacy: We pay attetjon To historical costs that are not recoverable
when considering
future courses of action.
Escalation of commitment: We invest additional resources in an apparently
losing proposition
because of tche effort, money, and time already invested.
Controllability bias: We believe we can control outcomes more than is actually
the case, causing
us to misjudge the riskiness of a course of action.
STABILITY BIASES
Status quo bias: We prefer the status quo in the absence of pressure to change
it.
Present bias: We value immediate rewards very highly and undervalue long-term
gains.
Because problems of motivation and cognition often occur when System 2 thinking
fails to kick in, the next step is to ascertain which aspect of the situation
caused System 1 to weigh the trade-offs among available options incorrectly and
what prevented System 2 from engaging and correcting the mistake. Common sense
can go a long way in diagnosing underlying causes. Put yourself in the shoes of
the person making the decision (or failing to make a decision) and ask, What
would I do in this situation and why?
At the retailer that wished to reduce health care costs, lack of motivation was
preventing employees from switching to home delivery for prescriptions. When
management asked them directly about the advantages and disadvantages of home
delivery, many expressed a preference for it yet only 6% of employees who
regularly took maintenance medications (such as statins for high cholesterol)
got around to signing up for it. Simple inertia kept them from picking up the
phone, enrolling online, or mailing in a form.
Wipro BPO, a division of the business-process outsourcing firm Wipro, faced a
different kind of motivation problem. Many of its employees were burning out
and quitting after only a few months on the job. To find out why, one of us
(Francesca), together with Daniel Cable and Bradley Staats, interviewed
employees and observed their behavior. The problem lay with the division s
onboarding process, which was focused on indoctrinating new employees into the
company s culture. The training failed to build an emotional bond between new
hires and the organization and caused them to view the relationship as
transactional rather than personal. Because they were disengaged and
demotivated, the stresses of the job dealing with frustrated customers, the
rigid scripts they had to use, and so on got to them, causing them to leave the
company just a few months after joining.
Design the Solution
Once they ve diagnosed the underlying source of a problem, companies can begin
to design a solution. In particular, managers can use choice architecture and
nudges, concepts introduced by Richard Thaler and Cass Sunstein in their 2008
book Nudge: Improving Decisions About Health, Wealth, and Happiness. The goal
of choice architecture is to improve people s decisions by carefully
structuring how information and options are presented to them. In this fashion,
companies can nudge employees in a certain direction without taking away their
freedom to make decisions for themselves.
Public-policy makers are increasingly using choice architecture tools to nudge
people toward better decisions on issues such as tax payments, medical
treatments, consumer health and wellness, and climate-change mitigation. And
businesses are starting to follow suit. For example, Google implemented choice
architecture in its cafeterias in an effort to get employees to adopt more
healthful eating habits. As Googlers reach for a plate, they encounter a sign
informing them that people who use bigger plates tend to eat more than those
who use smaller plates. Thanks to this simple change, the proportion of people
using small plates has increased by 50%.
Adjustments to the choice environment can drive big improvements at low or even
no cost. They include simply varying the order in which alternatives are
presented, altering the wording used to describe them, adjusting the process by
which they are selected, and carefully choosing defaults.
Here s a classic example: For many years, U.S. companies offered opt-in
retirement savings plans. Employees who did not actively sign up were not
enrolled. More recently, companies have been automatically enrolling their
employees. Under this opt-out system, employees have a fraction of each
paycheck (say, 6%) contributed to the plan unless they actively choose
otherwise. A collection of studies by one of us (John), with James Choi, David
Laibson, and Brigitte Madrian, found that on average only half the workers at
companies with opt-in systems join their plan by the time they ve been employed
at the firm for one year. Automatic enrollment generates participation rates of
90% or higher. In changing the default, firms altered neither the menu of
options available nor the financial incentives for enrollment. They simply
changed the consequences of refraining from actively indicating one s
preferences.
Choice architecture is more effective in improving employees decisions than
widely used approaches such as educating individuals or offering monetary
incentives (see When Economic Incentives Backfire, HBR, March 2009). The
reason: Those methods rely on individuals acting in their self-interest, which
people often fail to do. They also attempt to fundamentally change the way
employees process information and make decisions, which is difficult to
accomplish. The following levers can help companies take advantage of the
enormous potential of choice architecture to improve decision making.
Trigger System 1.
The emotions and biases that accompany System 1 thinking often wreak havoc, but
they can be tapped for productive purposes. Executives can trigger System 1 in
several ways:
Arouse emotions.
Let s return to the Wipro BPO example. In a bid to reduce the high turnover at
its call centers, the organization in collaboration with one of us (Francesca),
Dan Cable, and Brad Staats conducted an experiment aimed at strengthening
employees emotional connection with the organization. It divided new hires
into two groups: In one, the employees were asked on the first day of
orientation to think about their strengths and how they could apply them in
their new jobs. In the control group, the employees were not given an
opportunity for self-reflection. The approach, which Wipro BPO adopted, helped
new employees to feel they could be themselves at work. The resulting emotional
bond with the organization led not only to lower employee turnover but also to
higher performance as measured by customer satisfaction. We have achieved
similar results in other organizations.
Harness biases.
Executives can also use cognitive biases to their advantage. For example,
research shows that people feel twice as bad about incurring a loss as they
feel good about receiving a gain of the same amount (a bias known as loss
aversion) and that people pay extra attention to vivid information and overlook
less flashy data (known as vividness bias). Work conducted by the Behavioral
Insights Team (BIT), an organization set up to apply nudges to improve
government services, demonstrates this. BIT collaborated with the UK Driver and
Vehicle Licensing Agency to reduce the number of people delinquent in paying
their vehicle taxes. To trigger System 1 thinking, a new notification letter
was written in plain English along the lines of Pay your tax or lose your car
a departure from the complex legal language used in the original letter. To
make the demand more personal, some letters included a photo of the car in
question. The rewritten letters alone and those with the photo increased the
number of people who paid their taxes by 6% and 20%, respectively.
Organizations can also highlight the downside of failing to take action to
motivate weak performers. For instance, it s well known that having a
high-quality pipeline of new sales talent is an effective way to get
underperforming salespeople to improve their performance. This so-called man
on the bench effect makes vivid the possibility that they could lose their
jobs or bonuses, motivating them to work harder. Studies have found that
salespeople in districts with a bench player perform about 5% better than those
in districts without one. In the long run, the overall increase in revenue
outweighs the costs associated with hiring bench players.
Simplify the process.
Organizational processes often involve unnecessary steps that lower motivation
or increase the potential for cognitive biases. By streamlining processes,
executives can reduce such problems. At a health care center that one of us
(Francesca) worked with, the doctors had to use different IT systems across
departments to input patient information, which was then used to make decisions
about patient care. The hospital introduced a centralized system that allows a
doctor to see all of a patient s historical and personal information,
regardless of what department the patient visited in the past. As a result, the
doctors are much more motivated to keep the information up-to-date and to use
the system.
Engage System 2.
Executives have a range of options they can use to encourage greater
deliberation and analysis in decision making.
Use joint, rather than separate, evaluations.
Evaluating decision alternatives simultaneously, rather than sequentially,
reduces bias. For instance, a manager who is evaluating job candidates can
avoid making biased assessments of their likely future performance by comparing
them against one another rather than evaluating them separately. That s because
joint evaluation nudges employers to focus more on employees past performance
and less on gender and implicit stereotypes, as research Iris Bohnet, Alexandra
van Geen, and Max Bazerman shows. Managers often use joint evaluations in
initial hiring decisions, especially at lower levels, but they rarely take
advantage of this approach when considering employees for job assignments and
promotions. It can be helpful in many situations, such as choosing which
products to advance in the development process, evaluating investment
alternatives, and setting strategic direction.
Create opportunities for reflection.
Taking time out of our busy days to just think may sound costly, but it is an
effective way to engage System 2. Let s return to the example of the retailer
that wanted its employees to use home delivery for their medical prescriptions.
The firm told employees that in order to take advantage of their prescription
drug benefit, they had to make an active choice (by phone, web, or mail)
between home delivery and pick-up at a pharmacy. In doing so, the company
forced employees to reflect and make a decision. When the active choice program
was introduced, the percentage of employees taking long-term medications who
opted for home delivery increased more than sixfold. This generated a savings
of approximately $1 million, which was split roughly equally between employees
and the retailer.
Encouraging reflection can also help in training and employee development. One
of us (Francesca) conducted an experiment at a Bangalore call center with
colleagues Giada Di Stefano, Brad Staats, and Gary Pisano. Three groups of
employees were given the same technical training with a couple of key
differences. Workers in one group spent the last 15 minutes of certain days
reflecting (in writing) on what they d learned. Employees in another group did
the same, and then spent an additional five minutes explaining their notes to a
fellow trainee. People in the control group just kept working at the end of the
day. In a test given after the training program, employees in the first and
second groups performed 22.8% and 25% better, respectively, than those in the
control group, despite having spent less time working. We found that reflection
had a similarly beneficial impact on employees on-the-job performance.
Use planning prompts.
People often resolve to act in a particular way but forget or fail to follow
through. Simple prompts can help employees stick to the plan. In a study one of
us (John) conducted with Katherine Milkman, James Choi, David Laibson, and
Brigitte Madrian, we mailed letters to the employees of a midwestern utility
about the company s flu shot clinics, describing the benefits of flu shots as
well as the times and clinic locations. Some of the letters included blank
spaces for recipients to fill in with the time they would go to a clinic.
Merely prompting them to form plans by jotting down a time, even though they
were not actually scheduling an appointment, caused them to briefly engage
System 2, increasing the number of employees who got the shots by 13%.
A similar technique can be used to improve team performance. Many team efforts,
particularly those that fail to meet objectives, end with a vow to do better
next time. Unfortunately, such vague promises do nothing to prevent teams from
making the same mistakes again. A leader can help teams follow through on
resolutions by having members create clear maps for reaching their goals that
detail the when and the how.
Inspire broader thinking.
We commonly approach problems by asking ourselves, What should I do? Asking
What could I do? helps us recognize alternatives to the choice we are facing,
thus reducing bias in the evaluation of the problem and in the final decision.
But companies generally fail to broaden their perspectives in this way. In an
analysis of more than 160 decisions made by businesses over the years,
management scholar Paul Nutt found that 71% of them had been framed in terms of
whether or not an organization or a person should take a certain course of
action. That kind of framing often leads decision makers to consider only one
alternative: the course of action being discussed. A simple change in language
using could rather than should helps us think past the black and white and
consider the shades of gray. It also allows us to consider solutions to ethical
dilemmas that move beyond selecting one option over another.
How to U_e Choice Architecture to Improve 0eci_ion_
Executives can mitigate the effects of bias on decision making and motivate
employees and customers
to make choices that are in both the organization's and their own best
interests. Here's how.
1. UNDERSTAND HOW DECISIONS ARE MADE
Human beings have two modes of processing
information and making decisions:
- System 1 is automatic, instinctive, and emotional.
- System 2 is slow, logical, and deliberate.
2. DEFINE THE PROBLEM
Behavioral economics tools are most effetive when:
- Human behavior is at the core of the problem.
- People are not acting in their own best interests.
- The problem can be narrowly defined.
3. DIAGNOSE THE UNDERLYING CAUSES
To determine whether poor decision making
is a result of insuficient motivation or of cognitive
biases, ask two questions:
- Is the problem caused by people's failure
to take any action at all?
- Do people take actcion, but in a way that
introduces systematic errors into the
decision-making process?
4. DESIGN THE SOLUTION
Use one of three levers:
- Trigger System 1 thinking by introducing
changes that arouse emotions, harness bias,
or simplify processes.
- Engage System 2 thinking by using joint
evaluations, creating opportunities for
reflection, increasing accountability, and
intrroducing reminders and planning prompts.
- Bypass both systems by setting defaults
and building in automatic adjustments.
5. TEST THE SOLUTION
Rigorously test the proposed solution to avoid
costly mistakes:
- Identify a target outcome that
is specific and measurable.
- Identify a range of possible solutions
and then focus on one.
- Introduce the change in some areas of the
organisation (the 'treatcment group' and not
others (the 'control group').
Increase accountability.
Holding individuals accountable for their judgments and actions increases the
likelihood that they will be vigilant about eliminating bias from their
decision making. For example, a study of federal government data on 708
private-sector companies by Alexandra Kalev and colleagues found that efforts
to reduce bias through diversity training and evaluations were the least
effective ways to increase the proportion of women in management. Establishing
clear responsibility for diversity (by creating diversity committees and staff
positions, for example) was more effective and led to increases in the number
of women in management positions.
Encourage the consideration of disconfirming evidence.
When we think that a particular course of action is correct, our tendency is to
interpret any available information as supporting that thinking. This is known
as confirmation bias. Furthermore, once we invest resources in a course of
action, we tend to justify those investments by continuing down that path, even
when new information suggests that doing so is unwise a phenomenon known as
escalation of commitment. Together, these biases lead decision makers to
discount contradictory evidence and to ignore the possibility of superior
alternatives. Organizations can solve this problem by actively encouraging
counterfactual thinking (asking How might events have unfolded had we taken a
different course of action? ) and making sure that employees consider
disconfirming evidence. In situations where a group is making decisions, the
leader might assign one member to ask the tough questions and look for evidence
that reveals flaws in the planned course of action. (For more details on how to
do this effectively, see Making Dumb Groups Smarter, HBR, November 2014.)
Alternatively, the leader may ask function heads to rotate their roles to get a
fresh perspective, as auditors at accounting firms, credit officers at banks,
and board members serving on committees frequently do. People who are in charge
of one domain for a long time tend to irrationally escalate their commitment to
the established way of doing things; newcomers are more likely to notice
evidence that a different course of action would be wiser. Furthermore, the
knowledge that a rotation will bring in a new set of eyes to scrutinize past
decisions encourages people to make more-disciplined choices.
Use reminders.
Reminders are an effective way to engage System 2, helping us avoid the biases
that come from relying too much on System 1. Reminders also serve to highlight
goals we want to accomplish (for instance, finishing a presentation on time),
thus increasing our motivation. One of us (Francesca) and colleagues
collaborated with an automobile insurance company to use reminders to reduce
customer dishonesty. As part of the study, the company sent 13,488 customers a
form that asked them to report how many miles they had driven that year as
indicated on their cars odometers. The lower the reported mileage, the lower
the insurance premium tempting customers to underreport how much they had
driven. Half the customers were asked to sign a statement at the bottom of the
form that they were being truthful. The other half were asked to sign the same
statement at the top of the form. Customers who signed at the top reported an
average of 2,400 miles more than those who signed at the bottom, which
suggested that the reason for the difference was not driving habits but the
reminder before they filled out the form of a goal they care about (being
honest).
Ask What could I do? rather than What should I do?
Consider another example of how reminders trigger System 2 thinking. In his
book The Checklist Manifesto, surgeon and journalist Atul Gawande describes how
he introduced a surgery checklist to eight hospitals in 2008. Surgeons, nurses,
and other personnel systematically went through the checklist before performing
each surgery to remind themselves of the steps involved in the procedure. One
study that measured the checklist s effectiveness found that the new practice
resulted in 36% fewer major complications and 47% fewer deaths.
Bypass both systems.
The third approach that organizations can use to avoid biases and lack of
motivation is to create processes that automatically skirt System 1 and System
2.
Set the default.
Changing the default for standard processes automatically enrolling employees
in a retirement plan, for instance can have a powerful impact on ultimate
outcomes, especially when decisions are complex or difficult. At Motorola, for
example, employees who have previously worked on one product team may not join
another team working on a similar product. This rule is set as the default and
allows new teams to develop their own opinions without being affected by other
teams.
Build in automatic adjustments.
Another effective way to counter cognitive biases is to build in adjustments
that account for poor System 1 and System 2 thinking. Managers at Microsoft,
for example, figured out that programmers vastly underestimate how long it will
take them to complete tasks a common cognitive bias called the planning
fallacy. Microsoft s solution: Add buffer time to projects. Managers examined
historical data on project delays and came up with guidelines. Timelines for
updates to applications such as Excel and Word, for example, receive a buffer
equal to 30% of the schedule. For more complex projects, such as operating
systems, timelines get a 50% buffer.
How to Choose the Right Lever
We recommend that companies first consider bypassing both systems so that the
desired outcome is implemented automatically. Because this strategy requires no
effort on the part of decision makers, it is the most powerful way to influence
results.
For many reasons, however, this approach may not be feasible or desirable. It
may be impossible or prohibitively costly to automate the process in question.
The targeted individuals may resent having the choice made for them. Or a one
size fits all approach may be inappropriate.
Test Yourself: Are You Being Tricked by Intuition?
by John Beshears, Shane Frederick, and Francesca Gino
What's your default mode for judgments and decisions? To find out, take this
(very short) cognitive-reflection test, which was created by Shane Frederick at
Yale and originally appeared in The Journal of Economic Perspectives. At the
end, you ll receive feedback on your answers and gain insight into how you
arrived at them.
1. A bat and a ball cost $1.10 in total. The bat costs $1.00 more than the
ball. How much does the ball cost?
2. If it takes five machines five minutes to make five widgets, how many
minutes would it take 100 machines to make 100 widgets?
3. In a lake, there is a patch of lily pads. Every day, the patch doubles in
size. If it takes 48 days for the patch to cover the entire lake, how many days
would it take for the patch to cover half the lake?
Consider the case of a bank that must decide whether to renew loans to small
businesses. It could automate the renewal decision using information from the
businesses balance sheets and cash flows. However, the bank may make better
lending decisions if loan officers familiar with the businesses have discretion
over whether to renew loans. Even if two businesses appear identical in the
bank s computer systems, the loan officers may be aware of other factors for
instance, changes in the management team that make one a higher risk than the
other. Of course, giving loan officers discretion introduces biases into the
decision-making process a potential cost that must be weighed.
It s hard to change the way people s brains are wired. So change the context
for decisions instead.
If bypassing both systems is not an option, companies must choose whether to
trigger System 1 or engage System 2. The deliberative approach of System 2 can
override mistakes caused by System 1, but cognitive effort is a limited
resource. Using it for one decision means that it may not be available for
others, and this cost must be taken into account. For example, in a study of
fundraising efforts conducted at a U.S. public university by one of us
(Francesca) with Adam Grant, the performance of fundraisers improved
significantly when the director thanked them for their work. This intervention
strengthened their feelings of social worth by triggering System 1. One can
imagine interventions that would engage System 2 for instance, asking the
fundraisers to take more time to prepare for each call or increasing their
accountability for results. However, such interventions might drain their
energy and cognitive resources, diminishing their effort and persistence.
Test the Solution
The final step is to rigorously test the proposed solution to determine whether
it will accomplish its objectives. Testing can help managers avoid costly
mistakes and provide insights that lead to even better solutions. Tests should
have three key elements:
Identify the desired outcome.
The outcome should be specific and measurable. In the case of the retailer that
wanted employees to use home delivery for prescriptions, it was clear:
increasing the percentage of employees who signed up for home delivery.
Identify possible solutions and focus on one.
If you alter too many things at once, it will be difficult to determine which
piece of a complex change produced the desired effect. To avoid this problem,
the retailer rolled out its active choice prescription program without
simultaneously implementing other changes.
Introduce the change in some areas of the organization (the treatment group )
and not others (the control group ).
If possible, divide the individuals, teams, or other entities randomly into two
groups. Randomization helps ensure that any differences in outcome between the
two groups can be attributed to the change. When such simple randomization is
not feasible for reasons of logistics, ethics, cost, or sample size,
more-sophisticated analytical techniques can be employed. (For a more detailed
explanation of how to conduct rigorous business experiments, see The
Discipline of Business Experimentation, HBR, December 2014.)
Insidious biases and insufficient motivation are often the main drivers behind
significant organizational problems. But it s extremely difficult to change the
way people s brains are wired. Instead change the environment in which people
make decisions. Through some simple adjustments, executives can produce
powerful benefits for their employees and organizations.
A version of this article appeared in the May 2015 issue (pp.52-62) of Harvard
Business Review.
John Beshears is an assistant professor at Harvard Business School and a
faculty affiliate of the Harvard Kennedy School of Government s Behavioral
Insights Group. He cochairs an HBS executive education program on applying
behavioral economics to organizational problems.
Francesca Gino is a professor at Harvard Business School, a faculty affiliate
of the Behavioral Insights Group, and the author of Sidetracked: Why Our
Decisions Get Derailed, and How We Can Stick to the Plan (Harvard Business
Review Press, 2013). She cochairs an HBS executive education program on
applying behavioral economics to organizational problems. Follow her on Twitter
@francescagino.