A major priority for businesses is how to create a productive, engaged and motivated team. An engaged employee cares about their work and about the performance of the company, they want to feel their efforts can make a difference to that company. And time and effort invested by their employer will ensure they feel 100% committed.
Organisations are recognising that emotions and behaviours can affect a whole business and from this, interest in behavioural economics has grown rapidly. This is the revolutionary concept bringing together economics and behavioural science, theorised by Richard Thaler.
Richard Thaler is a pioneering figure in this movement and in 2017 he won his Nobel prize for economics and behavioural science. He took the story of a headteacher trying to motivate his students to eat healthier and found that putting the food at eye-level made them choose health over junk. Thaler’s study offers invaluable insight into what motivates people and how you can use that knowledge to your advantage, bringing a human-centric approach back into economics.
He calls it “organising the context in which people make decisions.”
How will it shape employee engagement?
Behavioural economics helps managers identify what drives their workforce to perform better. Is it money? Recognition? Incentives? Behavioural economics aims to explain and understand why certain incentives or motivations have a more significant impact than others. With this, researchers concluded that most decisions are taken using emotional reasoning rather than rational or logical reasoning. Therefore, while some people think monetary rewards such as compensation and bonuses are enough to motivate a team, these are in-fact external motivators – while temporarily motivating, are not as strong as other motivators. Of course, earning a salary is important for your workforce to survive – but if you’re aiming for them to be really engaged, then there’s simply more to it!
New research suggests that non-monetary rewards and schemes such as flexible working and experiences like holidays and group activities are internal motivators that improve employee engagement and retention. Moreover, the heuristic nature of people shows that these rewards and schemes are more powerful when they are personalised, as opposed to a one-size-fits-all model.
Thaler’s research looks at the idea of a behavioural ‘nudge’ that organises the context in which people make decisions. This can be transferred into business to help teams make unconscious decisions to benefit their wellbeing. For example, encouraging people to walk during lunch is proven to improve wellbeing and reduce stress; behavioural economics suggests that your team are more likely to take a walk if you introduce the option subtly, perhaps you could go on walks yourself to show it is an option for people. So – subtle communication strategies are likely to be more effective that an overt ‘push’ approach to encouraging wellbeing.
Thalers work has led to small changes with big effects across many industries. Research has shown that companies who apply behavioural economics outperform their peers by 85% in sales growth. For example, the government applied this theory and made small changes to reminder letters for tax returns and an extra £200 million was paid on time. These principles have reduced the number of inappropriate 999 calls and even reduced the number of repeat speeding offences, saving significant amounts of money, time and attention.
In today’s highly competitive job market, behavioural economics can improve an organisation’s popularity by creating high employee engagement by motivating and engaging employees effectively. The more humanistic view, championed by behavioural economics, will continue to shape the future of employee engagement as we gain a better understanding of what makes employees happy.
Here at Hollaroo, we place the user at the heart of our platform, creating a space that cherishes conversation and creativity. Our platform provides the perfect support system to make your employee engagement as strong as possible, building better relationships and making a stronger team. And the ideal environment for you to ‘nudge’ your workforce in a supportive and structured way!
Reach out if you’re interested to know more.