Society’s biggest problems need more than a nudge

THE CONVERSATION – May 15, 2016
by Joe Arvai

So-called “nudge units” are popping up in governments all around the world.

The best-known examples include the U.K.’s Behavioural Insights Team, created in 2010, and the White House-based Social and Behavioral Sciences Team, introduced by the Obama administration in 2014. Their mission is to leverage findings from behavioral science so that people’s decisions can be nudged in the direction of their best intentions without curtailing their ability to make choices that don’t align with their priorities.

Overall, these – and other – governments have made important strides when it comes to using behavioral science to nudge their constituents into better choices.

Yet, the same governments have done little to improve their own decision-making processes. Consider big missteps like the Flint water crisis. How could officials in Michigan decide to place an essential service – safe water – and almost 100,000 people at risk in order to save US$100 per day for three months? No defensible decision-making process should have allowed this call to be made.

When it comes to many of the big decisions faced by governments – and the private sector – behavioral science has more to offer than simple nudges.

Behavioral scientists who study decision-making processes could also help policy-makers understand why things went wrong in Flint, and how to get their arms around a wide array of society’s biggest problems – from energy transitions to how to best approach the refugee crisis in Syria.

When nudges are enough

The idea of nudging people in the direction of decisions that are in their own best interest has been around for a while. But it was popularized in 2008 with the publication of the bestseller “Nudge” by Richard Thaler of the University of Chicago and Cass Sunstein of Harvard.

A common nudge goes something like this: if we want to eat better but are having a hard time doing it, choice architects can reengineer the environment in which we make our food choices so that healthier options are intuitively easier to select, without making it unrealistically difficult to eat junk food if that’s what we’d rather do. So, for example, we can shelve healthy foods at eye level in supermarkets, with less-healthy options relegated to the shelves nearer to the floor.

Likewise, if we want to encourage more people to be organ donors, choice architects can design the form we fill out at the DMV so that the choice we make without thinking is the one that may allow us to save someone’s life in the future.

In my own research group, we lump these kinds of interventions under the umbrella of passive decision support because they don’t require a lot of effort on the part of a decision-maker. Indeed, these approaches are about exploiting – not correcting – the judgmental biases that people bring with them to all manner of decisions, large and small.

Since the publication of “Nudge,” there has been a proliferation of interest in bringing choice architecture into the policy mainstream. Even institutions like the World Bank and the Organization of Economic Cooperation and Development are rolling out their own nudge units. And, you shouldn’t be surprised to learn that the private sector has jumped on the increasingly crowded bandwagon of for-profit nudging.

We’ve successfully tested nudges for water conservation and sustainable food choice. Others have applied nudges to an even broader range of contexts. There’s no denying that choice architecture can work like gangbusters, which explains the widespread interest.

Sometimes a nudge isn’t enough

Nudges work for a wide array of choices, from ones we face every day to those that we face infrequently. Likewise, nudges are particularly well-suited to decisions that are complex with lots of different alternatives to choose from. And, they are advocated in situations where the outcomes of our decisions are delayed far enough into the future that they feel uncertain or abstract. This describes many of the big decisions policy-makers face, so it makes sense to think the solution must be more nudge units.

But herein lies the rub. For every context where a nudge seems like a realistic option, there’s at least another context where the application of passive decision support would be either be impossible – or, worse, a mistake.

Take, for example, the question of energy transitions. These transitions are often characterized by the move from infrastructure based on fossil fuels to renewables to address all manner of risks, including those from climate change. These are decisions that society makes infrequently. They are complex. And, the outcomes – which are based on our ability to meet conflicting economic, social and environmental objectives – will be delayed.

But, absent regulation that would place severe restrictions on the kinds of options we could choose from – and which, incidentally, would violate the freedom-of-choice tenet of choice architecture – there’s no way to put renewable infrastructure options at proverbial eye level for state or federal decision-makers, or their stakeholders.

Simply put, a nudge for a decision like this would be impossible. In these cases, decisions have to be made the old-fashioned way: with a heavy lift instead of a nudge.

Often, decisions are more complex

Complex policy decisions like this require what we call active decision support.

In these cases, specialists trained in the science of decision-making must work with people both to help them to overcome predictable biases and to approach decisions in a way that is different from how they might otherwise make them instinctively. To inform and structure these kinds of decisions, we – like choice architects – also look to insights from the behavioral sciences.

For example, we have a rich understanding of the decision-making shortcuts that people apply, as well as of the predictable biases that accompany them. So, we know what to be on the lookout for when we help individuals and groups make better decisions.

When evaluating problems that unfold over long periods of time, we know that people tend not to look at cumulative effects, or consider how choices made today may restrict the choices that can be made in the future.

Likewise, we see that decision-makers struggle with questions about how to put boundaries around the problem before them. For example, who really counts as a legitimate stakeholder, and who doesn’t? Likewise, are there hard deadlines or financial ceilings that must be obeyed? Or are these really soft constraints that can be challenged if the right option can be identified?

We’ve also learned that decision-makers often fail to adequately account for the broad range of objectives that ought to guide their decisions, as well as the performance measures that let them know if they’ve achieved them. And, we know that the manner in which people search for alternatives is often incremental at best. People look to obvious and easy-to-find options, the tendency that nudges exploit, at the expense of the creativity that’s required to address the really complex challenges.

Perhaps worst of all, we observe that people avoid the necessary trade-offs when a choice can’t simultaneously achieve all of the objectives that they deem to be important. It’s often the case that the objectives that push emotional hot buttons, like fear, are the ones we pay the most attention to when trade-offs are difficult or uncomfortable, even if these objectives play a relatively small role in terms of advancing our overall well-being.

Active decision support helps decision-makers to overcome all of these obstacles, as well as others.

Unlike nudging, the intent of active decision support isn’t to direct people toward a specific course of action. It is to structure the decision-making process so that resulting choices are defensible – in other words, in line with our prioritized objectives. For big policies, this includes the deliberate balancing act between social, economic and environmental well-being.

The good news for policy-makers is that a wide range of tools and approaches are available which may help them make more defensible decisions.

Active decision support approaches work by breaking complex decisions into more cognitively manageable parts. And they are desperately needed. The wicked problems faced by society can’t be nudged away. Emergencies like the humanitarian crisis in Syria and the slow violence of climate change cry out for active decision support.

Yet, as governments amass nudge units, and as the private sector adopts a behavioral mindset in their marketing and public relations offices, the need for behavioral insights that support complex decisions goes unmet. Why? Perhaps because active decision support is often seen as something smart, educated people in the public and private sectors should be able to do intuitively, on their own. But, the simple truth is, they can’t. And, without investing in building the internal capacity for active decision support, they won’t.

2018 Shared Prosperity Conference

 

Business+Impact at the Ross School of Business is proud to collaborate with the Aspen Institute Business & Society Program for a conference at the University of Michigan, Oct. 24-26, 2018, entitled, “Working Towards a Shared Prosperity: An Academic-Executive Dialogue.” With fewer opportunities for upward mobility and growing economic inequality, the American Dream is under threat. It is hard to imagine a return to the 1950s style social contract, but it is often overlooked that today’s firms – and their leaders – have choices.  

The purposes of the conference are to:

  • map the “choice points” available to firms—actions that are within business control—that contribute to broadly held prosperity.  What management practices positively effect employees—their development, well-being and productivity—and the labor market more broadly? What new business models do the same?
  • explore the incentives and constraints that are influencing business decisions about hiring, compensation, training, and job quality. What conversations are happening within firms—and in capital markets—around these issues? What are the narratives, assumptions and frameworks that result in less than desirable outcomes for low-wage workers? What conditions allow for “better” decisions?
  • examine recent and on-the-horizon changes in labor, capital and product markets, including the ascendance of AI. What are the effects of all these changes on economic inequality? Importantly, how do managerial choices feed back into these markets?
  • determine leverage points of change both in practice and academia to bring these “choice points” to light.  What would it take to establish new narratives and introduce new decision-making frameworks? What stakeholders need to be engaged?  What research needs to be highlighted and what questions need to be further investigated?

Watch Sessions & Speakers:

 


Program Line-up

Wednesday, October 26th

6:00 – 7:30 PM
Opening Cocktail Reception
Featuring The Secret Society of Twisted Storytellers

 

Thursday, October 25th

8:15 – 9:00 AM
Breakfast & Registration

9:00 – 9:45 AM
Welcome (Plenary)
Why are we examining managerial “choice points”? Does the issue of inequality all come down to profit and power? Or are there assumptions and frameworks that influence corporate decisions that have 2nd and 3rd order effects on the ladders of economic opportunity?
Gerald Davis, University of Michigan Ross School of Business
Scott DeRue, University of Michigan Ross School of Business
Judith Samuelson, Aspen Institute Business & Society Program

9:45 – 10:45 AM
Session 1—What is the Value of Work? (Plenary)
What are our aspirations for the “social contract” between employers, workers and society? How do firms, workers, and society at large view the obligations of employers? How do we recognize and highlight the inherent dignity in the concept of work, at all levels, and not just the professional or skilled class?
Elizabeth Anderson, University of Michigan
Laphonza Butler, SEIU Local 2015
Peter Cappelli, University of Pennsylvania, Wharton School
Scott Tong, Marketplace (Moderator)

10:45 – 11:15 AM
Break

11:15 – 12:30 PM
Session 2—The COO’s Dilemma: Choice Points in Operational Design (Breakouts)
How do COOs make decisions about the ways firms operate and—and how do these influence the health of employees and society?

a) The Gig Economy and Precarious Work
We’ve seen a rise in temporary, contract and part-time workers. What are the effects of this “plug & play” employment model on inequality and long-term business results?
Lindsey Cameron, University of Michigan Ross School of Business
Steven Hatfield and Jeff Schwartz, Deloitte
Allison Pugh, University of Virginia
Maureen Conway, Aspen Institute Economic Opportunities Program (Moderator)

b) Who Gets the Job?
As industries and sectors grow, what kinds of hiring practices help or hurt economic inequality? How can talent pipelines be developed in a way that brings the opportunity for good jobs to those that are being marginalized?
Daisy Auger-Dominguez, (formerly) Viacom
Malaika Myers, Hyatt
Nicole Sherard-Freeman, Detroit Employment Solutions Corporation
Branden Snyder, GoodJobsNow
Dror Etzion, McGill University (Moderator)

c) Labor at the Base of the Pyramid
How do corporations create environments that promote quality employment at their supply and distribution partners?
Ach Adhvaryu, University of Michigan Ross School of Business
Sean Ansett, At Stake Advisors
Vik Khanna, University of Michigan Law School
Regina Abrami, University of Pennsylvania, The Wharton School (Moderator)

d) Whose Responsibility is it to Create a Skilled Workforce?
What roles have business, government and individual employees played in the past—and what does the future look like?
Teddy DeWitt, University of Michigan Ross School of Business
Chioke Mose-Telesford, City of Detroit Office of Workforce Development
Andrea Wood, Best Buy
Lavea Brachman, Ralph C. Wilson Foundation (Moderator)

12:30 – 1:45 PM
Lunch—Presentation of Accenture/Aspen Research
Eva Sage Gavin, Accenture
Nicholas Whittall, Accenture
Miguel Padro, Aspen Institute Business & Society Program (Moderator)

2:00 – 3:15 PM
Session 3—The CFO’s Dilemma: Capital vs. Labor—Changing Tides (Breakouts)
Rewarding capital has taken precedent over rewarding labor in recent years. What are the drivers in this change? What frameworks and perspectives allow CFOs to make decisions that build healthy, long-standing organizations?

a) Work, Wages and Inequality
Are pay rates truly set by the market? How might we think of wages like we do stock prices–a measurement of the future value of an employee? And how has the provision of benefits shifted over time—and how might it change in the future?
Sue Dynarski, University of Michigan Ford School of Public Policy
Kyle Handley, University of Michigan Ross School of Business
David Rolf, SEUI Seattle
Ida Rademacher, The Aspen Institute (Moderator)

b) Standing Up to Investor Pressure
What skills are needed by IR personnel and CFOs to make a case for a reinvestment of profits into human capital?
Adam Cobb, University of Texas
Martin Schmalz, University of Michigan Ross School of Business
Steve Sleigh, Sleigh Strategy LLC
Judith Samuelson, Aspen Institute Business & Society Program (Moderator)

c) Humans vs. Robots
How might the ascendancy of AI effect the balance between capital and labor? How are growth, efficiency and quality weighted when firms are making decisions about automation?
Adam Litwin, Cornell University Industrial and Labor Relations School
Kentaro Toyama, University of Michigan School of Information
Nicholas Whittall, Accenture

 

3:15 – 3:45 PM

Break

3:45 – 4:45 PM
Session 4—Teaching Immersions (Workshops)
How are innovative faculty challenging the traditional business school view of employment and labor?
a) Economic Inequality and Social Mobility
b) Technological Change at Work
c) Human Capital Sustainability
d) MIT (tentative)

5:00 – 6:15
Session 5—What is the Value of Sharing Prosperity? (Plenary)

Watch the entire presentation here

To the degree that workers are currently viewed as costs to be managed, how do we change the narrative for boards, executives and especially shareholders? How do we utilize the desire for purpose-driven work to combat distrust in capitalism and corporations and tell a different story about how corporations create value for society?
Carl Camden, IPSE US-The Association of Independent Workers and former CEO, Kelly Services, interviewed by Rick Wartzman, Drucker Institute KH Moon Center for a Functioning Society
Joined by John Denniston, Shared X, Joel Rogers, University of Wisconsin Law School and Carmen Rojas, CEO, Workers Lab

6:15 – 7:00 PM
Cocktails

7:00 – 9:00 PM
Dinner and Presentation of Ideas Worth Teaching Awards

 

Friday, October 26th

8:15 – 9:00 AM
Breakfast

9:00 – 10:15 AM
Session 6—Envisioning the Future: Business as Creators (Plenary)
Watch the entire presentation here
Business is not an innocent bystander when it comes to forces such as technology and market shifts. Why then is the current narrative about how business can “cope” with the future of work instead of recognizing the deep influence business has in building that future? What could a more just version of work look like and how do we get there?
Jim Keane, CEO, Steelcase interviewed by Joe Nocera, Bloomberg
Joined by Maureen Conway, Aspen Institute; and Tom Kochan, MIT Sloan School of Management

10:30 – 11:45 AM
Session 7—The CEO’s Dilemma: Workers and the DNA of a Company (Breakouts)
The culture of a company often comes from the top and enforced by actions by the CEO. What strategies are organizations using to create a symbiotic relationship between employer and employee?

a. Re-designing the Employment Relationship
What makes for a good job—now and in the future? How are market conditions driving decisions about quality work? How do firms choose “good job strategies” and how are these executed—across organizations?
Talia Aharoni, Coller School of Management (Moderator)
Julie Gherki, WalMart
Arne Kalleberg, University of North Carolina, Chapel Hill
Zeynep Ton, MIT Sloan School of Management

b. Reopening Lines of Communication: The Worker Voice
In business and business schools, how do we break the “management v. labor” binary?
Katie Corrigan, AFL-CIO
Debra Plousha Moore, Former Chief of Staff, Atrium Health
Patrick McHugh, George Washington University

c. Ownership: Alternative Structures that Change the Employer – Employee Dynamic
As fewer companies go public, and co-ops and other employee ownership programs are becoming more popular business models, what are the benefits and challenges to these new models and are they being addressed in business schools?
Joseph Blasi, Rutgers University
Kate Cooney, Yale School of Management (Moderator)
David Drews, former CFO for Project WorldWide
Marjorie Kelly, The Democracy Collaborative

d. The Rise of the Activist CEO
We’ve seen more and more business leaders speak out on political issues. What place does the business community have in advocating for policy changes that effect the market and in turn their employees?
David Bach, Yale School of Management
Gerald Davis, University of Michigan Ross School of Business (Moderator)
Rebecca Henderson, Harvard University
Zachary Savas, Cranbrook Partners

11:45 – 12:15 PM
Break

12:15 – 1:15 PM
Session 8—Worker Voice in Business Schools (Workshops)
Issues in labor are rarely addressed inside the halls of the business school. Meanwhile, graduates will go on to start companies, manage teams, and lead organizations without understanding the effects of their decisions. How might we integrate new thinking into traditional management education?

1:15 – 2:15 PM
Lunch and Closing

 

 

 


Highlights

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See a complete gallery of photos from the event