It's all about achieving high performance!

By Michael McCauley

I read a fascinating article recently by Michael Grunwald in Time magazine. It details how the Obama administration is using the science of change and behavioral economics to move the country in the desired direction. They base their approach on the latest behavioral research, including the findings behind recent best sellers Influence by psychologist Robert Cialdini, Predictably Irrational by Dan Ariely, and Nudge by Nobel laureate Daniel Kahneman. The approach can be summarized in 4 steps:

Step 1: Make it Clear. Recent studies suggest that better information – in this case information about energy use, diet, our mortgages and credit card rates – helps people make better choices. For example, what if every public company was required to provide a standardized one-page summary of financial information,  rather than the voluminous annual reports they provide now? Average people would then be able to compare one company against another and make informed investment choices.

Step 2: Make it Easy. Life is complicated and, given the opportunity, most people tend to take the easy path. For example, in one study, only 36% of women joined a 401(k) plan when they had to sign up for it, but when they were automatically enrolled and had to specifically opt out in order to decline,  86% participated.

Step 3: Make it Popular. Behavioral studies show that nothing drives personal choice quite like the power of conformity. Research shows that homeowners are most likely to save energy and recycle when they think everyone else is doing it, too. The Obama campaign’s ”Get Out The Vote” drive last summer was able to mobilize millions of people with a simple message – “a record turnout is expected.”

Step 4: Make it Mandatory. If all else fails, pass laws that mandate the desired behavior. Laws requiring efficient appliances, health insurance or limits on carbon emissions are examples. Notice that this is seen as a last resort, not the first line of defense. Numerous studies show that mandatory “command and control systems” that require certain behaviors are often vigorously resisted. It is useful only when the all other options (i.e., steps 1-3) fail to result in the desired transformation.

This behavioral approach to change is significantly different from the approaches taken by previous administrations. It will be interesting to watch the results.