7 ways to nudge employees into doing the right thing

To paraphrase: the mind often works in not-so-mysterious ways – and this can be useful when it comes to a workplace benefits strategy

7 ways to nudge employees into doing the right thing

How employees reach decisions about benefits is usually seen as a straightforward mathematical calculation of cost versus value. However, as a calculator, the human brain leaves much to be desired, because we’re sidetracked by everything from unconscious bias to faulty rules of thumb and illogical instincts.

Encouraging employees to make the right choices, therefore, means understanding the forces at play in the decision-making process, and using this knowledge to nudge individuals towards the best possible outcome.

Understanding how people behave in real life situations – as opposed to how they should behave in theory – falls within the field of behavioural science. “The past decade or so has seen more interest in this area,” observes Charles Cotton, Performance and Reward Adviser for the CIPD, “and benefits professionals have started to explore how they can factor it into their work.”

What has emerged is a new approach to designing strategies, structures and communications in order to encourage employees to make optimal decisions. So here are seven ‘nudges’ that take advantage of how people really process information, in order to persuade them to make better decisions.

1. Automatic opt-in

We make many decisions through rules of thumb (or heuristics, to use its proper term), which allow us to bypass incredibly complex choices that would otherwise leave us paralysed by indecision. One rule of thumb we fall back on is that when the status quo seems not to be doing us any harm, we will stick with it, and do nothing. This has traditionally stood in the way of employees signing up for vital perks.

One approach is to re-structure benefits so that doing nothing is not an option. So, for example, if employees are invited to take part in the share scheme, they can be required to indicate how much they would like to invest each month. The lowest possible option may be £0, but they will still have to actively pick this.

Alternatively, benefits professionals can structure schemes so that those who do nothing accidentally end up doing the right thing. This approach has had tremendous success when it comes to automatic enrolment into workplace pensions, but it doesn’t have to stop there. So, for example, anyone returning from parental leave may be routinely enrolled into a seminar about family friendly policies, and expected to attend unless they specifically request not to.

2. Save more tomorrow

When it comes to voluntary pension contributions, Cotton says we fall foul of a cognitive bias that means we value consumption in the present far more than consumption in the future. It means employees struggle to give up income today in order to save for a pension.

One option is to push the pain into the future too – so that employees do not feel the loss of income so keenly. A clever way to do this is through a ‘save more tomorrow’ scheme, where employees commit to allocating a substantial part of their future pay rises to savings. If they want to reverse this decision, they will need to take action further down the line – and thanks to the tendency to do nothing – employees end up paying the higher contributions.

3. Make the future seem closer

In order to nudge employees to prioritise long-term benefits, one option is to make the long term feel closer, by presenting examples of the consequences of their actions. So, for example, a recent study discovered that watching a film about retirement poverty for just three and a half minutes increased the amount of money people were willing to allocate to retirement savings.

Cotton says technology offers solutions too: “It can be used to age a photograph of the employee, so their pension statement comes with a picture of how they will look in their retirement. It helps them envisage their future.”

4. Make long-term investments seem smaller

Another way to convince people to put more away for the long term, is to make the commitment seem smaller. Employees don’t want to miss out on something today in order to save for a future that they cannot connect with. If, however, they can be convinced that they are missing out on something small today for a major benefit tomorrow, then the balance is weighted more to the future. One way to trivialise the price is to look at the per-day cost. It’s why so many things are sold as being ‘for the price of a cup of coffee.’

Another option, says Cotton, is to frame the proposition in terms of loss avoidance. Individuals feel the pain of a loss far more than they feel the benefit of a gain of equal size. It means that employees are likely to be gripped by messages about the free money they are missing out on (in the form of tax relief and employer contributions) as a result of not taking advantage of the pension scheme.

5. Make it seem like the norm

Another instinct that prevails is a desire to follow the crowd: we feel far safer when we are doing the same sorts of things as our peers. Communications can therefore position investing in specific benefits as the norm.

One option is to set up a ‘refer a friend’ system, where employees who opt in can receive a discount or incentive for encouraging their friends to follow suit. Cotton says this can be highly effective, as long as the organisation fully considers the behaviours they are incentivising, and can be certain there will be no unintended consequences.

Communications can also feature positive role models drawn from the employee’s peer group, and organisations can share details of the number of individuals taking part, to reinforce social norms. He says: “You can frame communications as: ‘This is what everyone else is doing’.”

6. Make it feel relevant

We cannot possibly keep all the information we receive about everything in our heads all the time, so one mental shortcut we use is to decide very quickly whether something matters – and whether we should pay attention. It’s essential, therefore, to target communications carefully and segment the workforce, so that employees aren’t switched off by what seems irrelevant.

It’s also worth paying attention to who delivers the messages, because employees are more likely to listen to someone who seems like themselves. Again, segmentation of the workforce allows employers to ensure documents include case studies they can identify with.

7. Appeal to their ego

People make decisions partly because of the way it makes them feel about themselves, so employees need to feel recognised when they make good decisions. One option is to congratulate them on the steps they have already made – such as signing up for a workplace ISA or pension scheme, or paying for life or health insurance. The call to action can then be framed as ‘You have already taken great steps for your future and your family, but you can still do more’.

The idea of nudging employees into making specific decisions is a relatively new one. It may go against the grain in an environment where so much emphasis has been placed on individual choice and self-determination. However, regardless of what employee benefits professionals do, these forces will be at play when employees are making decisions. The question is whether the organisation wants to be at the mercy of unconscious bias, faulty rules of thumb, and illogical instincts; or whether they want to use them in order to drive better decisions.

Saturday 19 August 2017
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