Implications for Nudge Theory for Organizations

Team IIBP Anveshan, General Psychology, Issue 10, Mental Health, Organizational Culture

In today’s rapidly changing world, change is the only constant. And changes on the outside demand for change on the inside, from within – organizations and individuals. This implies that organizations aiming to thrive in the VUCA world are persistently looking for ways to bring about positive, desirable changes. There is definitely no dearth of tools, techniques and interventions to bring about change in individuals which would collectively and ultimately translate into organizational change. This article aims to explore one such tool – the utility of the Nudge theory (mix of economics & psychology) for organizations, especially to bring about change in the individuals.

Though suggestions from the theory were predominantly aimed for public policy and law, the application of the theory for organizations seems alluring. One major factor that makes it so is that, in essence, it costs little or nothing but at the same time can give us significant payoffs. And something like this is bound to make us humans wanting to know more about it, right?

The Oxford dictionary defines ‘nudge’ (v.) as pushing gently and gradually. Richard Thaler & Cass Sunstein, the authors of the book “Nudge: Improving decisions about Health, Wealth and Happiness” (2008) operationalize the term as ‘as any aspect of the choice architecture that steers people’s behaviour in a predictable way, without forbidding any options or significantly changing their economic incentives’. (Tams, 2018)

Understanding why and how the Nudge theory has a powerful and significant effect, would be incomplete without understanding the 2 systems – the modes of thinking which were popularized by the Nobel Prize winning Psychologist Daniel Kahneman. He refers to the systems as: System 1 & System 2. The former functions automatically and quickly and requires no voluntary control e.g. detection of hostility in a person’s voice. The latter is the reasoning mode of decision making which requires attention e.g. focusing on the voice of a particular person in a crowded room; filling out a tax form. (Thaler & Sunstein, 2008)

The nudge theory recognizes the power exerted by System 1, sometimes over System 2, on our decision making. Nudges work because humans are not always rational in decision making. Nudges are about the choice architecture as mentioned above and take into account this reliance on System 1. Johnson et al (2012) identify that “what is chosen often depends on how the choices are presented.” There is a wide range of nudges and some of them which could be possibly applied to organizational change have been highlighted below:

Simplification: If an organization realizes that many of the employees are avoiding using a new technology because of it not being user-friendly, required accommodations should be made to tone down the complexity.

Increase in ease & convenience: This is can be put into practice for improving well-being at workplace. Often times, employees are unwilling to opt for medical check-ups, getting flu shots, etc. due to the inconvenience involved in the process – travel, signing up, etc. If the organization could arrange such programs at the workplace or assist in minimizing the inconvenience, more and more employees might sign up. An organization in New Zealand managed to increase the uptake of flu shots among its employees by 33% by making it more easy and convenient.

Social norms: Most of us don’t want to or like to miss out on what people around us are doing. This nudge involves informing people that “most people are doing this”. This can be applied when introducing a new training program which needs to be completed by all employees in a given timeframe. Sending out messages instead such as “Almost everyone has already completed the training, please make sure you do as well” may prove to be pleasingly effective.

Warnings/graphics could be used to encourage positive behaviours or dissuade negative ones. E.g. A graphic of a green leaf near the bulb switch could encourage people to switch off the lights when leaving from a room.  A steel plant placed posters of “watching eyes” as reminders of safety procedures for the employees.

Pre-commitment strategies: These could be useful in goal-setting – employees might feel more motivated to act in accordance to the goals as a result of the pre-commitment.

Eliciting implementation intentions: If their intentions to action are elicited along with an association to their identity, people are more likely to actually engage in the activity e.g. if people are posed with questions like “as a senior employee of the organization, do you plan to enrol to be a mentor for the younger employees?” they are more likely to enrol for it to maintain the positive identity.

It is quite clear from the above examples that nudges have a slight advantage over forceful methods of behaviour change as confrontation is minimized and people have freedom to choose. This is not to say that aggressive methods demanding adherence are ineffective but they do tend to make people resist change.

Nevertheless, the theory is not without its share of critics and flaws. They argue that the benefits of nudging are short-term and do not lead to long lasting changes. Some of the critics do not doubt the effectiveness of nudging but do doubt the scope and the scale of using nudges as a remedy for complex issues with several cause factors. There are conflicting views about the extent nudges override people’s interests. Thaler himself warned about the dangers of so-called ‘evil nudging’ (2015) criticising nudges that violate all three of his “guiding principles” i.e. nudges that are not transparent, are misleading, are not easy to opt out from and those which do not aim at behaviour change in the receiver’s best interests.” Whenever he signs copies of his book, he signs it as “Nudge for good”.

It appears that research and application of the nudge theory to organizational settings is not as extensive as that of other domains of applications. However, the fact that subtle and apparently insignificant details can have a major impact on people’s behaviour and in effect lead to large scale organizational change is certainly worth exploring.


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Kahneman, D. (2011). Thinking, fast and slow. Penguin UK.

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Radha Joshi, M.A. in Psychology (Industrial & Organizational).

Psychology & Language enthusiast with an immense interest in Learning & Development. Currently working as a Language Trainer and pursuing PG Diploma Training & Development from the Indian Society for Training & Development.