How to Use Behavioural Economics to Build Company Culture - Market Research & Behaviour analytics

How to Use Behavioural Economics to Build Company Culture

ByHimanshu Vashishtha

How to Use Behavioural Economics to Build Company Culture

Company culture is made up of shared beliefs and values which are established by the organization’s leaders and then communicated and embedded through various methods, ultimately shaping employee perceptions, behaviours and understanding. Company culture it’s the element that differentiates a business from its competitors. Usually, companies with a strong culture tend to develop superior results as compared to the companies with weaker cultures. When a culture is strong, it leads to motivated employees and high performing managers.
Behavioural economics has many practical applications for building, creating and modelling company culture. Here are six essential tips.

1. Building a culture of innovation – Prospect theory’s principals can help build a company culture that leads to innovation.
In order to foster creativity, willingness to take risks and encourage employees to approach problems with innovative solutions, companies will have to create an environment where it is ok for people to fail.
It’s also true that sometimes taking risks may not lead to the desired outcomes and can result in failures. However, businesses can’t gain the benefits from innovation if they don’t allow employees to take risks. Employees will never take risks if they are more concerned with the consequences of a possible failure than the benefits from the possible gains. If companies wish to foster a culture of innovation, they must make their employees feel psychologically safe to share their ideas and be reassured that their ideas will be supported and respectfully questioned and not scoffed at.

2. Empowering employees – If businesses want their employees to make good decisions, they should empower them with good information.
Employees make the right judgements when information from their leaders are frequent, transparent, honest and effective. In order to make good decisions, employees must feel like they can trust inputs and messages that come from the management; otherwise, they’ll disregard that information and make decisions without understanding the overall context.
More often than not when employees take bad decisions is because they worked with bad information and without knowing or understanding the bigger picture.
From middle management to front-line supervisors, leaders must communicate clearly and provide actionable feedback to employees, so that employees, in turn, can make educated decisions.

3. Drive positive behavior – Social norms are the set of beliefs that dictate certain behaviours among groups.
Within a company, social norms may be explicit (like the rules in a company handbook) or implicit (like the unspoken beliefs that influence gender roles), but both are powerful indicators and drivers of what’s acceptable—and what’s not—in a company.
To encourage positive and collaborative behaver businesses should cultivate exactly the behaver that they would like to see in the organization.
Once social norms are established, company’ leaders should embrace it and act as ambassadors so that employees can take implicit behavioural directly from them. This will avoid confusion about what behaviours are tolerated or encouraged in the company.
Driving positive behaver is paramount for businesses that aspire to be innovative and a step ahead of the competition.

4. Encourage collaboration – Encouraging collaboration among teams and creating an environment where people can tap into each other’s knowledge and proactively contribute to each other’s work will help employees to make the right decisions and adopt the right behaviours.
Collaborate with each other and helping colleagues required efforts, patience and it takes up time, that’s why people may be reluctant on doing so and prefer to carry on with their status quo instead. Some employees may regard this practice as a distraction from their day to day work, and they may not see the long-term benefits.
To encourage collaboration among team leaders should act as a role model by making it easy for employees to pick their brains and to spend time with them discussing projects, addressing issues and sharing best practices.

5. Rewards and recognitions – Context can play a huge role in outcomes, and companies should take this into consideration while evaluating which type of rewards implement for their employees.
For instance, if a business value collaboration, constructive criticism and curiosity then rewarding people purely on the basis of their achievements may not be the best approach.
When companies are ruled by market norms, they will see interactions as transactions, where the cost should be less than the corresponding benefit. Instead, companies ruled by social norms are focusing on relationships and don’t expect immediate or direct reciprocity, in this scenario employees will do what they believe is right, in the confidence that others will do the same. Rewards can make the workplace into a place where market norms prevail. If that is not the kind of culture that companies want, then they need to think not just about using financial incentives. People often give more value to a silent gratification (like seeing the boss join in) than what they cannot see, even if they know it happens (like a money transfer).
6. Avoid biases – ‘A vast body of research shows that the hiring process is biased and unfair. Unconscious racism, ageism, and sexism play a big role in whom we hire. But there are steps you can take to recognize and reduce these biases ‘ Rebecca Knight Harvard Business Review. During the hiring, process managers tend to see themselves as rational, well-considered decision makers, relying on their unquestioned objective evaluation but unfortunately, the reality is different.
Unconscious bias in personnel decisions is a problem. Businesses should recognise this and take the right measure to reduce bias in their organizations. Once bias is minimized companies can use the hiring, promoting and firing process as a tool to shape the company culture.

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