5 things HR can learn from the Nudge Theory

Whilst enjoying my holiday in North Norfolk recently, I realised I’d been ‘nudged’. Not in the physical sense, though. Rather, I’d been gently influenced into making a better personal decision.

Let me explain. Whilst sitting in a rather lovely pub in Wells-on-Sea, I was initially going to choose their ‘Dirty burger’ for my lunch. It sounded perfect; beef, cheese, bacon, onions, then dipped in gravy to finish. Not to mention a shed load of fries and onion rings. However, the menu also told me how many calories were in it. Spoiler alert: there were a lot.

Consuming so many calories in one sitting could have been a bad idea – especially as I’m on a bit of a health kick right now. So, I decided instead to have a very nice chicken salad and avoid virtually three-quarters of the calorie intake. It was only after I’d finished my lunch that I realised, this was a prime example of ‘Nudge’ theory in action.

What is the Nudge theory?

The Nudge theory has been around since the early 2000s. Also known as behavioural economics or choice architecture, it’s a concept that aims to positively influence people’s behaviours and decision-making without enforcing any mandates, or imposing significant constraints. It came to the public’s attention in the bestselling 2008 book “Nudge: Improving Decisions About Health, Wealth, and Happiness” by Richard H. Thaler and Cass R. Sunstein.

Nudge theory suggests that by making small changes to the way choices or information are presented – in my case, showing just how many calories were in my original lunch choice – individuals can be “nudged” towards making better decisions for themselves.

Since then, the theory has been adopted by people and businesses alike. For instance, many utility companies here in the UK now provide households with feedback on their energy consumption compared to similar households. This information, often accompanied by energy-saving tips, serves as a nudge to consumers that encourage them to reduce their energy usage.

Nudging has also been famously adopted by the British Government. Early successes included achieving a 15% rise in tax payments by pointing out in reminder letters that most others paid on time. It’s also credited to adding 100,000 organ donors to the national register by prompting people to sign up when they paid for their car tax.

Those examples may be seen as positive uses of the Nudge theory, but it’s not without its detractors. It’s been argued that it can be manipulative or paternalistic because it involves designing choices to influence a person’s behaviour. Also, there are concerns about potential biases in the design and implementation of nudges. Therefore, it’s important to approach the application of nudge theory with transparency, ethical considerations, and careful evaluation of its impact.

With all that being said, the Nudge theory is proving to be a vital – and successful – tool in influencing behaviours and actions. And this is good news for HR professionals.

Nudge theory: where HR can benefit

Over the past few years, virtually every HR department in the UK has had their hands full dealing with wave after wave of negative workforce trends.

The ‘Great Resignation’, ‘Quiet Quitting’, and more recently, ‘Bare Minimum Mondays’ are all highlighting the fact that something is going wrong with how employers engage with their employees. These trends are also indicating that employee satisfaction is in short supply for many.

Luckily, the Nudge theory is something HR teams can use to help turn the tide of negativity. By leveraging Nudge theory, HR practitioners can create more supportive and productive work environments, encourage positive behaviours, and help employees make better decisions that align with their wellbeing and career development. Here’s how…

Influencing positive cultural change

Nudge theory can be used to good effect if your business is trying to initiate a cultural shift. For example, actively supporting a collaborative culture where people are encouraged to share knowledge and ideas.

If your workforce is primarily based in one location (a traditional office, for instance), collaboration expert Pierre Battah of Qimple points out that the simple act of moving two departments you want to collaborate physically closer together can better people interactions. Positioning water coolers or having break out areas in central locations can also prompt people to network and get to know their colleagues better.

If you have remote workers, you could provide some best-practice advice for managing remote working employees to your line managers. For example, you could suggest having daily virtual check-ins, where people can discuss priorities, update others on their progress or seek advice from colleagues. This will ensure no-one feels left out and supports regular communications between employees – vital for better collaboration.

Better financial literacy

With no let-up in the cost-of-living crisis, everyone is having to be extra careful with their finances. There’s also a growing debate about the need for employers to support the financial wellbeing of their staff. It was certainly a hot topic at this year’s Festival of Work, where financial wellbeing was a core theme for many of the seminars that took place at the event.

Auto-enrolment is a good example of where Nudge theory is already being used to help people become more aware about the financial decisions they need to make – especially in later life. But, looking beyond pensions, there will be employees who are worried about making ends meet, the cost of borrowing or mounting debts. As a result, they’ll be highly likely to be stressed and not performing at their best.

Although employers shouldn’t be offering financial advice, people practitioners can provide tools and resources for employees to improve their financial literacy and make better financial decisions. This can be easily done through HR portals and shared workspaces, as vital learning assets and communications can be shared across an organisation and be readily accessible, too.

Supporting positive health and wellbeing

Employers are increasingly treating the physical and mental health of their staff as a business priority. In fact, an increased focus on health and wellbeing strategies was considered a key HR trend of 2023.

That’s because it’s now largely accepted that if the workforce is happy and healthy, the organisation will benefit from reduced absence, higher productivity and more enthusiastic and engaged employees. This is where nudges can be highly effective.

To give an example, Google helped to cut its workers collective calorie count by three million after it positioned the healthy foods in its canteen more prominently. Bike-to-work schemes, fitness competitions, encouraging physical activities during the day (such as taking a walk at lunch time) or inter-departmental sporting contests are other initiatives that can help to nudge healthier behaviours.

Recognising the efforts and behaviours of employees

People’s behaviour is strongly influenced by what they see others are doing. So it follows that staff recognition schemes are a great way to cause a ripple effect. Simple initiatives such as peer-to-peer recognition schemes are brilliant ways to encourage your employees to highlight the good work that goes on, and celebrate each other’s achievements – all key ingredients to supporting positive cultures.

In addition, ‘employee of the month’ or monthly awards such as ‘customer service star’ — where staff are publicly recognised and rewarded for their efforts — prompt people to think about their own work practices, and how they might emulate other successful colleagues.

Recognition or rewards don’t just have to be confined to work-related tasks or projects. For example, rewarding good health and safety behaviour, as opposed to ‘telling people off’ for not using the right equipment, has also proven to be a more successful approach into encouraging people to take health and safety seriously.

Maintaining HR compliance

Lastly, gentle ‘nudges’ are also useful when you’re struggling to get people to comply with corporate systems or change long-held ways of doing things. Embedded performance management processes are a prime example of this, especially if a business has decided to ditch manual, paper based processes, and joined the 21^st century by using HR software with integrated performance management software.

Good HR software systems can often be setup to ‘nudge’ managers when appraisals are due, rather than HR having to chase them down to remind them. This type of automated reminder is more likely to result in the process being completed on time, particularly if you can introduce an element of competition by showing completion rates in other departments.

The same goes for onboarding, too. Modern integrated HR platforms with onboarding software can ‘Nudge’ managers to ensure key tasks are completed in good time. They can also ensure everyone knows what’s expected of them with features such as automatic email notifications and reminders. These types of nudges make the onboarding of new staff much more streamlined, and create a better experience for both employer and employee.