Building an Ethical Foundation for Behavioral Science

4 Ways that Leaders Can Help Their Organizations to “Nudge for Good”

Richard Thaler often signs copies of his landmark book “Nudge: Improving Decisions About Health, Wealth and Happiness” with the inscription and admonition to “Nudge for Good.” He’s also written frequently and passionately about the evils of “sludge” (using behavioral science principles in ways that ultimately harm people, or that run counter to their own well-being). His co-author Cass Sunstein, in turn, has written an entire book regarding the ethics of applied behavioral science.

Clearly, the pioneers of this revolution realized from the beginning that there were ethical issues associated with choice architecture and nudging behavior change. To put it another way, they recognized that Behavioral Science was a method — and it could be applied to either help people or confuse and deceive them. To their credit, they emphasized and illustrated positive, pro-social applications (smoking cessation, retirement savings, etc.), and continue to argue publicly against using behavioral science for nefarious ends. Yet they were still subject to accusations of government overreach, paternalism or manipulation.

As we turn to the private sector, these ethical questions take on additional dimensions. After all, most businesses are driven primarily by a profit motive. For the purposes of this conversation, we can assume that they are operating legally and serving an underlying need. However, that’s not to say that there aren’t many “shades of grey” involved. Nudging people to eat more chips may be good for a business, its employees and shareholders, but it’s harder to argue that it is clearly good for society. Nudging salespeople to sell the most expensive and profitable products may drive revenue, but is it ethical?

This reality poses many challenging questions for private sector organizations, regarding the application of Behavioral Sciences:

• How can organizations apply behavioral science ethically in support of their profit motive?
• Should behavioral science be employed across all activities — or only within some functions?
• How and when is it ethical to nudge employees and customers?

Inevitably, organizations will have different approaches to these ethical questions. Some are already oriented towards business models that emphasize customer and employee retention, positive social impact and/or long-term profitability — and they will most likely view behavioral science through this lens. Others are arguably more transactional in nature and may think entirely in the context of ROI.

I’d argue that employing these new tools and frameworks properly is vital to their internal acceptance and long-term effectiveness. Thus, applying behavioral science ethically is not only the right thing to do, it’s also a good business strategy. To that end, let’s briefly discuss four (4) ways that leaders and internal champions can help ensure that their organizations are on the right track.

Defining Behavioral Science

Perhaps a leader’s most important role lies in effectively “defining” behavioral science within the organization. How does it fit? What should it be used for? These questions have obvious practical implications, in terms of driving acceptance and setting realistic expectations.

To that end, an important starting point is to position behavioral science as a complement to existing efforts. It is a new, additional framework with which to view opportunities and challenges, through the “lens” of System 1, human heuristics and behavior change. Thus, it can potentially add value to nearly all aspects of an organization, from insights to marketing and management. However, it is best viewed — and most likely to be embraced — as a “extra tool in the toolkit,” rather than a replacement for tested approaches.

In parallel with “framing” and positioning behavioral science for internal adoption, there’s the challenge of defining these tools from an ethical perspective. What are the standards for use? Who gets to decide?

In the absence of clear policies, guidelines or limits, it’s quite likely that behavioral science will be applied to support or enhance anything that the organization is doing today. Most likely, marketers and sales teams will naturally gravitate towards employing choice architecture, heuristics and nudges to drive revenue. For example, they may integrate defaults to “make it easier” for customers to automatically enroll or renew their purchases. Or they may add higher-priced options to influence choice architecture and subconsciously lead customers toward higher spending. And frankly, these approaches can easily be rationalized, as simple extensions of current marketing efforts.

Thus, it is up to management to pro-actively address this issue, by outlining a philosophy underlying the use of behavioral science. Here, I can suggest emphasizing two ideas:

• The objective of moving people from Intent to Action

The unique strength of Behavioral Science lies not in awareness or persuasion, but rather in helping those who are “already convinced” overcome their inertia and adopt new habits. In other words, it is best at facilitating change.

• The pursuit of long-term customer and employee relationships

There’s no question that these tools can be used to mislead people into splurging, super-sizing and spending more. But frequently, people will later regret these decisions and most likely resent (and possibly avoid) the organization involved. Similarly, some employees will have concerns and qualms as well. Clearly, this is not a promising long-term business strategy.

It’s far better to instead position Behavioral Science as a vehicle to help clients solve their larger life challenges (tied to health, wealth and happiness) — and/or for employees to “do the right thing” (tied to diversity, sustainability, etc.). In both cases, the potential rewards are significant. If a company can truly help a person solve a life challenge — or help an employee to feel good about herself and her work — they are likely to be rewarded with long-term loyalty.

Set the Tone by Starting Internally

A related question is where and how to begin applying Behavioral Science within an organization. On one level, this is a structural issue, which is addressed in greater depth elsewhere in this book. But it should also be considered from an ethical perspective, as the first projects can be powerful in setting a message across the organization.

For this reason, I recommend starting Internally (among employees), rather than Externally (among customers). In fact, there are several benefits to beginning by nudging employee behavior, such as healthy eating, sustainability or diversity/inclusion.

• First, efforts among employees are inherently lower risk, from a revenue and business standpoint — and thus, a good “testing ground” for new tools and approaches.
• Second, they also tend to be quite salient and visible within the organization, which can raise awareness, bring behavioral science “to life” and create success stories that resonate strongly.
• Third, they are very likely to steer the organization in a positive ethical direction, as they don’t raise the temptation (or accusation) of manipulation.

Of course, this is not to say that behavioral science can’t be applied ethically in marketing, insights, CX, design and sales functions — and depending on the scope and mandate of your team, you may need to start directly with external-facing initiatives. In fact, there are likely to be larger rewards, returns and ROI in these disciplines. However, as noted earlier, there are inherently greater challenges and risks as well, most notably balancing immediate financial incentives (to sell and profit) with ethical considerations (towards customers). Thus, you may be well-served to learn and “set precedent” internally, before moving on to external audiences.

Finding the Right Projects

Most likely, the selection and management of specific Behavioral Science projects will be delegated. However, leaders can help shape and influence this process, by providing frameworks and criteria to help guide decision making. Here, I can offer three guidelines, particularly as efforts involve influencing external audiences (customers, guests, etc.)

Begin with the business case (and existing intent)

The reality is that in a business context, pilot projects are more likely to get funded (and later recognized) if their financial impact can be clearly and easily quantified. Thus, I do encourage clients to look for opportunities with clear, measurable ROI potential (most likely via cost savings or increased revenue). Behavioral science doesn’t need to be limited to philanthropy and corporate social responsibility, as this limits its potential and undersells its impact. And pursuing positive ROI can be compatible with ethical considerations, provided that other important criteria are met.

For example, many hotel chains are losing millions in wasted food and energy use. This dollar figure helps frame (and justify) an investment in applying behavioral science to nudge guests in ways that could reduce this waste, much of which is inadvertent.

This final point (that the waste is inadvertent) is important, as nudging should not require convincing or coercing people, nor tricking them into new choices against their wishes. Instead, the goal is to help them convert their (positive) intent into action. In fact, if an effort requires helping people to act on their existing opinions/beliefs, it is likely a good fit for behavioral science tools.

Define the behavioral change (ethically)

For many clients, the most challenging step is viewing and defining their challenges through a behavioral lens. Often, they start with very broad objectives, such as “get more people to use our product,” and have difficulty articulating exactly which actions need to change. Yet the more narrowly managers can define desired changes (i.e. exactly who does what differently), the more likely they are to succeed.

For an Italian digital payments company we worked with, ethnographic research revealed that the primary behavioral opportunity lay in moving people from cash to digital for their small, everyday transactions. This transition was not only a business opportunity for the company but also provided clear convenience and security for consumers. Ultimately, this led to specific nudges targeted to newsstand/kiosk environments, reminding customers of digital payment options and benefits at their point of decision

Of course, this moment of definition also provides an opportunity to reconsider ethical dimensions. Is this specific behavior change in the best interest of the consumer? Is there evidence of incoming intent or openness to this change? Are we moving people from Intent to Action — or do they need to be actively persuaded or convinced?

Focus on “win-win-win” opportunities

Finally, we encourage private sector clients to search for changes at the intersection of what’s good for the company, its customers, and society. While this vision may sound idealistic or simplistic, it is actually a strong and realistic foundation for building long-term customer relationships. And importantly, there are clear opportunities across all business sectors:

• In financial services, businesses can better help investors to save money and plan properly.
• In health care, organizations can help ensure that patients take their medicines as directed.
• In hospitality, hotels can help guests conserve energy and reduce waste.
• In food and beverages, marketers can help people eat healthier, recycle and/or exercise portion control.

In our experience, it’s important for organizations to aim for these positive, pro-social outcomes, with the understanding that “shades of grey” will emerge in implementation, as they consider specific behavior changes and interventions. For example, it can often be difficult to determine if a particular action is clearly in the customers’ best interest — and in some cases, they may conclude that it is OK to “nudge for neutral,” provided that they are not intentionally deceiving, nor clearly hurting customers.

Navigating the Grey Area (with tools and processes)

If efforts are guided and grounded by clear, positive objectives, it becomes easier to navigate these real-world ethical issues and challenges. In addition, it’s valuable to provide business teams with processes and tools to help them evaluate new opportunities and/or proposed interventions. For example, teams could be provided a set of questions to use in deciding whether to pursue a given project or effort, such as:

• Would you be comfortable with this intervention, if you or a family member were the customer or participant involved?
• Would you be happy to fully explain/disclose this project and intervention to a participant?
• Would you be confident that participants will not regret the decisions they’ve made, due to this intervention?
• Would you be proud of your work, if this intervention was published on the front page of a national newspaper?

Behavioral Science also teaches us that salience is critical in instilling new habits and positive behaviors. Therefore, it’s important to develop reminder systems for integrating behavioral science into daily activities. For example, we recently helped a financial services client to build “BeSci Checklists” into training and support materials for their advisors, as visible reminders to guide their client interactions. We’ve also built in “Ethical Implications” as a formal criterion upon which to screen and optimize proposed interventions (“nudges”) prior to their implementation. Building these steps into the process, at both the project selection and executional level, serves to keep ethical considerations salient.

Applying Behavioral Science Ethically and Effectively

For business leaders, behavioral science represents both an opportunity and a responsibility. Clearly, there’s the potential to drive profitable change, among both customers and employees. And inevitably, there’s the temptation to jump immediately to opportunities and applications with the most immediate return and projected ROI.

However, it is wise to balance and guide these efforts with ethical considerations. By framing behavioral science properly, learning through Internal initiatives, finding the right projects and integrating ethical considerations within processes and reminder systems, leaders can lay the groundwork for lasting impact and success. Collectively, these steps will:

· Help promote internal acceptance and application

· Focus energies on efforts that are most likely to be successful, profitable and ethical

· Address and help mitigate concerns, by associating behavioral science with positive, pro-social change, rather than manipulation.

As importantly, they will help position Behavioral Science as a catalyst for a more sustainable approach to business, which aims to serve the long-term needs of all stakeholders (and society). Therefore, beyond infusing these new tools within our organizations, our larger goal should be to instill a new mindset, committed to the vision of applying behavioral science ethically and effectively.