Do you need a corporate ‘nudge unit’?
In January the UK’s biggest neobank, Revolut, announced the formation of something it called CultureLab – an internal team of behavioural scientists and psychologists with the task of overseeing employees’ adherence to a new list of “value-based behaviours”. By the standards of conventional HR practice, it was a remarkable move.
The crucial context is that this came after a spate of bad press for Revolut, with current and former employees speaking out about the firm’s “aggressive” culture. The bank presented CultureLab as its chosen method for changing the situation at speed. In effect, it had handed that responsibility to the scientists, who were armed primarily with a tool known as nudge.
For those unfamiliar with the term, it has its origins in the 2008 book of the same name. In Nudge, Richard Thaler and Cass Sunstein posited that human behaviour could be influenced without coercion through the use of small, carefully designed prompts that they called nudges.
“The underpinning idea of nudge theory is that by redesigning choice architecture it is possible to influence the behaviour and decision-making of groups and individuals,” explains Martyna Śliwa, professor of business ethics and organisation studies at Durham University Business School.
How does nudge work in practice?
The idea has been widely used in politics over the past 15 years. In 2010, for instance, David Cameron created a behavioural insights team in the Cabinet Office to change how his government communicated its policies. That ‘nudge unit’ team is credited with positive outcomes such as the shift to an opt-out model for workplace pension scheme enrolment, massively increasing the number of workers saving towards retirement.
The principles of nudge have been applied in the business world. A 2020 study by Morningstar examined the use of behavioural science in businesses and not-for-profit organisations. It found that 45% had some form of behavioural science expertise in house, but this knowledge was typically applied in public-facing functions such as marketing. Only 5% of respondents had a behavioural science specialist in their HR teams.
Indeed, most businesses dabbling in behavioural science tend to work with external consultants to implement HR-related nudges. That was the approach taken at BNP Paribas when the bank signed up to the He For She project, a UN initiative on gender equality.
The bank maintains a roughly even gender split across the organisation, but there was initially a clear disparity in two of its teams. About 70% of staff in the HR function were women, while only 15% of senior leaders in the global markets team were women.
“The question we had at the time was why for some roles the gender mix remained imbalanced, despite a non-discriminatory hiring process,” says Caroline Courtin, director of diversity, equality and inclusion at BNP Paribas.
Outside help or an in-house team?
To address this problem, the bank’s HR team worked in partnership with BVA Consulting to seek behavioural solutions to this cultural challenge. They gathered diagnostics on the issue, interviewed staff from both teams and hosted a round-table discussion with a team of behavioural scientists to discuss their findings. This work was then detailed in a ‘nudge book’, which was distributed to the global markets and HR teams.
This led to the implementation of ‘golden nudges’ for each function. In the HR team, at least one man must be involved in the writing or editing of a job description, to ensure that the language used appeals to both sexes. The job title ‘HR business partner’ is also written out in full to encourage applications from other areas of the business. Likewise, on the global markets team, at least one woman must be included in the interview process to help create a reference point for female candidates.
Since implementing these nudges, both teams have achieved a more consistently even gender split. Courtin explains that the bank regularly uses the nudge principle because of its light-touch nature and its ability to effect lasting change.
“What’s interesting with those nudge techniques is that they have no real cost. You just test them, learn and then think about your process,” she says. “Today we are much more careful and systematic in how we write and review job ads.”
Why it’s still early days for nudge
Although there are several possible use cases for behavioural science in the HR function, the application of nudge here is in its infancy compared with other parts of the business world.
“Not enough is known about how behavioural science can help learning and development,” says Sarah Nicholl, a corporate learning strategist and author. “While most large organisations have a change management or a project management office, not a lot of behavioural science is being applied. Bringing even just a behavioural scientist into those groups would help enormously.”
The specifics of how best to deploy a nudge capability in an organisation are still the subject of some debate. For instance, is it better to have a team of in-house behavioural scientists, who can turn their hand to any problem, or to embed consultants in teams for the duration of a project?
For Śliwa, it depends on the specialisms of the behavioural scientists concerned. “The risk is that the in-house nudge team might lack specific knowledge in different areas, including those functions in which the organisation might wish to use nudges,” she explains. “In this sense, a key negative side effect of an in-house nudge unit might be, ultimately, its limited effectiveness.”
Nicholl notes that formalising a behavioural science unit could also make employees feel they are being manipulated or policed, especially in struggling businesses.
“As everybody’s saying, there are ‘economic headwinds’ right now and employees are worried about layoffs,” she says. “Depending on how you implement nudges, and particularly if you put it in a formal system, people will be more sensitive to how that’s being used and how their behaviour is being assessed.”
How to embed nudge skills in existing teams
A more effective use of the nudge principle, Śliwa suggests, might instead lie in embedding knowledge of nudges within teams, either by assigning dedicated behavioural scientists to key functions or by training non-expert employees to apply the tenets of nudge theory.
At BNP Paribas, the team hasn’t explicitly hired for behavioural science competencies but has taken a pragmatic approach to when and where staff are nudged.
“The value of a nudge is your ability to test and learn, and to try simple solutions that can have a significant impact on a decision-making process,” Courtin says. “We haven’t made nudge a principal technique and we don’t have a ‘nudge team’. We’ve made it transparent too – we’ve even published about our use of the technique.”
HR-focused nudges therefore have a role to play in organisations, even if full-blown Revolut-style CultureLabs are yet to take hold. One reason for that, Nicholl suggests, is that behavioural science’s interdisciplinary nature means there’s a lack of undergraduate and professional training on nudge, resulting in few HR leaders well versed in the subject.
And the case of BNP Paribas may even demonstrate that a nudge is perhaps best used as a focused tactic rather than a formal strategy. That doesn’t mean Revolut’s behavioural scientists won’t succeed, but to view a nudge unit as a silver bullet in and of itself might be a mistake.