Nudge theory

Introduction:

Nudge theory was originally developed 21st century by American behavioral economists Richard
Thaler and Cass Sunstein and they presented this theory is the renowned book ‘Nudge –
Improving Decisions about Health, Wealth and Happiness which was published in 2008. A
nudge refers to principle that small action can influence on the choice of people or the way
people behave. It focuses on engaging people by knowing that how people make choices or make
decisions. The Nudge theory encourages indirect techniques to influence the behavior instead of
giving direct instructions. For example, instead of saying that monitoring of diabetes is essential,
availability and accessibility of glucometer can be improved which will positively influence
human behavior. Similarly, asking people to join a gym or play sports in office, create conditions
that people start using stairs.

What is nudge theory?

Nudge Theory is a technique developed in behavioral science and psychology

that asserts small indirect suggestions can have a huge change and positive effect
on outcomes (Waddington, 2014) . The Nudge theory is a way of offering small clues that
support decision-making. It’s not about penalising people financially or limiting their freedom if
they don’t act in a certain way. Instead, it is about making it easier for them to make a certain
decision. Simple real life examples would be footprints painted on the floor leading to recycling
bins, or putting a few euros in the collection plate before passing it around. Placing fruit at the
eye level at a school canteen has proven to bring much better results than the direct instruction to
children to eat more fruit ( Kandinskaia, 2018). The Nudge Theory is a flexible and modern
concept in behavioral sciences to understand how people think, make decisions, and behave. The
concept helps people to improve their thinking and decisions, manage all kinds of changes, and
identify and change existing influences (Toolshero, 2020).

Why is it effective?

Nudge theory is a novel Change Management model that underscores the importance of
understanding the way people think, act, and decide. The model assists in encouraging human
imagination and decision making, and transforming negative behaviors and influences on people.
The approach helps understand and change human behavior, by analyzing, improving, designing,
and offering free choices for people, so that their decisions are more likely to produce helpful
outcomes for the others and society in general.

Nudge theory helps reform existing (often extremely unhealthy) choices and influences on people.
The theory is quite effective in curtailing resistance and conflict resulting from using autocratic
ways to change human behavior. The model promotes indirect encouragement and enablement —
by designing choices which encourage positive helpful decisions — and avoids direct
enforcement. For instance, playing a ‘room-tidying’ game with a child rather than instructing

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 her/him to tidy the room; improving the availability and visibility of litter bins rather than erecting
signs with a warning of fines.

Organizations are increasingly using behavioral economics to optimize their employee and client
behavior and well-being. Nudge units or behavioral science teams are being set up in the public
and corporate sectors to influence people to address pressing issues. For instance, to increase
customer retention by changing the language of support center staff to motivate customers to
consider long-term benefits of a product; or to make employees to follow safety procedures by
placing posters of watching eyes to remind them of the criticality of the measure.

An effective Nudge initiative necessitates much more than deploying a few experts in heuristics
and statistics. The senior leadership should lay out a conducive environment for successful
behavioral transformation. This entails assisting the Nudge unit to focus, place it appropriately,
create awareness, train and de-bias people, implement effective rewards, and follow high ethical
standards (Bridges, 2019).

How it can be utilized to make organizational change?

As the Nudge theory central idea is to indirectly influence individuals without taking freedom of
choice. It discourages any change in behavior of employees through following strict orders and
directions. It is about giving choices and through providing enabling environment and
encouragement there will be change in behavior of employees.
It is not an easy process and it starts with analyzing the current behavior of employees and what
are the desired changes in their behavior. Following are the three actions which are necessary to
leading change in organization.

Perception nudges are actions which play around perceptions of organizational behavior.
Individual have different perception of the different situation. So, it is important to have an
understanding of employees’ perception of the desired change. This will also give an idea that
what are impediments to change and how these can be overcome by influencing perception of
employees.
Motivational nudges are actions which are needed to make employees care about a change. There
are many forms of motivational nudges and organization can take example of other individual
example to show the others that it is the best behavior and it fits to the idea of change.

NUDGING FOR IMPLEMENTING CHANGE:

Defining change is like knowing your destination. If the desired change is clearly defined and
articulated among the employees than it is more likely that it will be successfully achieved.
Stakeholder analysis is also necessary to have analysis of how change will be perceived by all
stakeholders and how the expected change is going to affect all of these stakeholders. This
analysis will provide with change leaders more clarity and better strategy to implement change.
Making a rational plan to implement a change is also a part of nudging process. It will also help

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 in identifying what resource will be needed and when these resources will be required to execute
the change.

Inclusive decision making is also essential part of nudging process that those who matter most
and those who are affected by the desired change should be involved in decision making process.
Listening to feedback is a powerful nudging technique. Whether the feedback is coming from
employees or it is from customers, it is important to be open about feedback and learn from it.
The road of change is full of thorns. The role of change leaders and management is to remove
bottlenecks on the way to change. By doing this, change leaders will get support from the
employees and all other important stakeholders. Patience is needed to implement change. The
change leaders need to keep morale of team high and keep moving consistently. Teams should
not show complacency on initial wins and real goal should be remain in focus till it is achieved
(Tahir, 2020).

Nudging unit (David Cameron):

The Nudge Unit was established in the Cabinet Office in 2010 by David Cameron’s government
to apply behavioural science to public policy. Now owned partly by the Cabinet Office, by Nesta
and by employees, it has operations across the world. Today, the UK has moved to a
decentralized model, where ministries have set up their own teams, and the BIT became a limited
company, jointly owned by the UK government, Nesta, and its employees (Afif, 2017).

The placement of the Nudge unit depends on the strategic purpose of creating the unit. At some
companies, it is housed centrally within the corporate headquarters as a global Nudge operations
center; a few have accommodated the unit within the R&D or marketing department; some have
benefited by moving the unit away from the corporate center so as to be closer to products and
services; whereas other practitioners believe that the customer-focused behavioral science team
should sit within the product management domain.

Another critical element for the success of the Nudge unit is hiring and deployment of right
resources. At the commencement of the program when key capabilities are typically not available
in-house, most organizations hire people from the outside for their Nudge units. A few companies
have recruited solely from the in-house due to the criticality of institutional knowledge and the
long learning curve required to acquire it, whereas some have recruited across different
geographies. On average, the unit comprises of 3 to 8 members, however, larger organizations can
have more people scattered globally (Bridges, 2019)

Nudge theory on politics

The previous US president Barack Obama recruited Cass Sunstein as an adviser and exhorted US
government departments to adopt behavioural economic concepts such as nudge. In 2010 the UK
Government set up a Behavioural Insights Team, commonly dubbed a “nudge unit”, to develop
policies. Administrations in Denmark, Australia, Canada and the Netherlands have also shown an
interest (Chu, 2017). The UK government’s strategy is influenced by nudge theory, an idea first
popularised by the behavioural economist Richard Thaler and political scientist Cass Sunstein.

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 “Nudging” uses insights about our mental processes to change our behaviour through coaxing
and positive assertion. Rather than forcing us to do things, nudging tweaks the environments in
which we make choices – for example by requiring people to opt out of organ donation, rather
than opting in (Yates, 2020).

Conclusion:

Nudge theory is often described as a multidisciplinary approach to the applied science of human
behaviour. In essence, nudge theory suggests that positive reinforcement of behaviours, coupled
with hints and suggestions, can (subconsciously) influence motivation, collaboration, and
decision processes. What is more is that such nudges towards the “right” behaviour can often be
more effective, and less prone to resistance from groups or individuals, than direct instruction or
overt enforcement. The key to successful nudging often involves the individual being unaware
that their thoughts, decisions and subsequent behaviours are being influenced by an external
force.

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 References

Afif, Z. (2017, October 25). “Nudge units” – where they came from and what they can do. Retrieved

from blogs.worldbank.org website: https://blogs.worldbank.org/developmenttalk/nudge-units-

where-they-came-and-what-they-can-do

Chu, B. (2017, October 9). This is what nudge theory means – and why you should care about it.

Retrieved from The Independent website:

https://www.independent.co.uk/news/business/analysis-and-features/nudge-theory-richard-thaler-

meaning-explanation-what-it-nobel-economics-prize-winner-2017-a7990461.html

Olga Kandinskaia. (2018, February 6). How to use Nudge Theory for business success. Retrieved

December 12, 2020, from Cyprus International Institute of Management website:

https://www.ciim.ac.cy/how-to-use-nudge-theory-for-business-success/

Tahir, U. (2020, January 18). What is Nudge Theory in Change Management. Retrieved from CMI

website: http://changemanagementinsight.com/nudge-theory-in-change-management/

Waddington, S. (2014, December 19). 10 “Nudges” to Radically Change Your Organization. Retrieved

December 12, 2020, from Ketchum website: https://www.ketchum.com/10-nudges-to-change-

your-organization/

What is the Nudge Theory? Definition, examples and more. (2020, June 7). Retrieved December 12,

2020, from toolshero website: https://www.toolshero.com/psychology/nudge-theory/

Yates, T. (2020, March 13). Why is the government relying on nudge theory to fight coronavirus? | Tony

Yates. The Guardian. Retrieved from

https://www.theguardian.com/commentisfree/2020/mar/13/why-is-the-government-relying-on-

nudge-theory-to-tackle-coronavirus

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