Behavioral economics is the discipline that combines insights from the fields of psychology judgment and decision-making and economics to produce an understanding of the way humans make decisions that is more accurate and more robust than any one of those fields could produce on its own.
Now unfortunately one thing that behavioral economics
teaches us is that humans can be quite bad at making decisions, behavioral
economics then gives us a way of thinking about what we can do about
that.
It's very costly to train people to become better thinkers it's just very hard ,you can do it but it takes too much time and energy instead behavioral economics suggests that we can change the environment in which people are making decisions and tilt the field in favor of better decisions.
This is has wide applicability you can think
about domains such as financial decision making health decision making
workplace productivity and frankly life happiness, and these are all domains
where the behavioral economics framework can provide us with ways of improving outcomes
if helping people make better decisions and ultimately make makeup sort of
better decisions for their organization and in their lives.
Four steps to change the decision making context;
There are four
steps that we should take in order to change the decision making context.
-First; we should identify the problem
-Second; we should ask what is the psychology that is driving this issue or this problem.
-Third; we should design a change.
-fourth we should try to test the for its effectiveness.
In order to test
for the effectiveness of a change we should really think about it as an intervention
for some of the people in the organization we are going to leave things as
usual, and for other people in the organisation's we're going to make the change
and by comparing the two groups we're going to be able to say whether the
intervention was successful or whether it didn't produce any difference.
We conducted a
change at an organisation's called we probe they're based in India they're in
the context of Business Process Outsourcing.
The problem they
came to us with high levels of turnover using our scientist hats we looked at
the problem and the psychology that was driving it, and what we know from
psychology is that people love control and they like to express themselves at
work.
So we redesign
the onboarding process that was our intervention for some of the employees we
left things as usual and for the other employees we gave them an hour to think
about their strengths and how they could bring them out at work.
The result it was a huge success we were able
to reduce turnover by over 20% seven months after introducing the intervention,
and we just changed one hour of their own boarding process, so we look for
interventions that are not that costly to the organization and they can produce
a big big impact as in this case.
When we think
about change or making a change we often think about something that is costly
it's gonna take a long time and is gonna be in need of a lot of support from a
lot of people. What we're teaching executives in this program instead is that
changes can be quite simple but produce very powerful effects such that
decision-making processes are more effective for themselves and for the
organization.
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