McKinsey researchers Anna Güntner, Konstantin Lucks, and Julia Sperling-Magro, in Lessons from corporate behavioral-science units, collate findings about so-called ‘nudge units’ — behavioral science teams — that attempt to shape behaviors:
The word nudge has since caught on in the corporate world and, along with better data analytics and improved intervention techniques, has helped accelerate the advance of behavioral science into the corporate mainstream. As nudge units sprout up in the private sector, they are helping companies promote change and increase productivity on the factory floor, design better products, drive higher sales, and enhance decision-making processes (exhibit). Nudge units create win–win outcomes for companies, employees, and customers. One insurance company, for example, has used nudges to great effect to promote the advantages of using a partner network of car-repair shops; another has encouraged customers to exercise and lead healthy lifestyles, thereby reducing claims. A German utility company has used related techniques to combat irrational decision making among employees at all levels of the organization.
Our experience, and that of our interviewees, strongly suggests that there is no one-size-fits-all approach for creating effective nudge units. But there are some common challenges and trade-offs that most organizations will face — hence these six questions that any leader seeking to launch or scale a nudge unit should ask.
- Where should the nudge unit focus? Should they focus on employee well-being or decision-making in the board room? Or everything? Start by picking a focus area.
- Where in the organization should the nudge unit sit? If employee well-being is the target perhaps HR, but if your goal is customer-focused, perhaps it should sit in product management.
- How to populate the nudge unit? A team of 3–8 experts seems the norm today, a mix of behavioral scientists with specialists in other areas, such as psychology, marketing, and advanced data analytics.
- What is being done to set up the unit for success? ‘Cross-functional involvement is key to any behavioral science agenda’, the authors warn. They go on, ‘Comfort with experimentation is critical in every behavioral-science effort. The academic approach, after all, requires thorough testing through randomized controlled trials, particularly, as one respondent pointed out, in complex domains, such as finance, when behavioral interventions can produce unexpected second-order effects.’ This is rocket science, people.
- How to demonstrate impact? Ultimately, the impact has to manifest itself by behavior changes in the focus areas picked, for example, increased health metrics for employees or faster innovation in product introduction. Analytics is key, and it’s imperative to remain engaged with all constituencies and to pick a small number of highly visible projects.
- Are ethical challenges being faced head-on? We are talking about nudging people, after all, so asking the ethical questions upfront is critical. While a subtle shift of making, for example, 401(k) contributions opt-out instead of opt-in are reasonably benign, attempts to harness well-understood human cognitive biases to ‘trick’ people into making even desirable choices may not stand up to ethical inspection.
The authors found a key message deep in a statement from one unnamed practitioner:
Behavioral science “should be part of everything we do,” he added. “There is probably no challenge that could not be rendered more effective through its use.”
I expect that nudge units will be growing in importance in the years to come, and may replace ‘change management’ activities. What if the key to successful organizational change is really to be found in applied behavioral science, rather than bringing in a team of ‘organizational culture’ consultants?