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1. Analyzing the Concept of Recognition. Recognition presupposes a subject of recognition (the recognizer) and an object (the recognized). Before asking what kind of subjects and objects of recognition are possible (1.2) this entry discusses the meaning of “recognition” and how it differs from neighboring concepts such as “identification” and “acknowledgment” (1.1).
Definition. Problem recognition is the initial stage in the consumer decision-making process where an individual identifies a discrepancy between their current state and a desired state, prompting the need for a solution.
Definition. Satisficing refers to how managers typically take into account several business objectives when making decisions, rather than the 'neo-classical' view that they simply take into account the single objective of maximising profits. The term satisficing was introduced by American economist and political scientist, Herbert Simon , in ...
- How to Use this Guide
- Highlights
- Introduction
- Nudges
- Nudging for Good (and Nudging to Manipulate)
- All Nudges Are Incentives but Not All Incentives Are Nudges
- What is “Behavioral Economics”?
- How Behavioral Economics is Relevant to IRR Professionals
- Test Everything
- Summary Part One
- Curating Choice in IRR
- Applying the Availability Heuristic in IRR
- Timing: The Right Message at the Right Time
- Timing: Data Analytics
- Timing in IRR
- Other Important Behavioral Economics Tools and Practices
- Play, Purpose and Potential in IRR
- Leveraging Happiness in IRR
- Summary: The Ethical and Careful Use of Behavioral Economics
- Interviews & Acknowledgments
- Key Resources
This paper offers a concise guide to applied behavioral economics in the incentives, rewards, and recognition field. Behavioral economics is difficult to define. It combines much from several disciplines, including the fields of traditional economics, social psychology, and neuroscience. Behavioral economics (BE) attempts to identify and comprehend...
Green text boxes offer practical tips and advice in applying BE to IRR. Read these to find or spark ideas you can put into action and start testing right now. Gray-shaded text boxes make points that summarize the passages around them. Read the gray boxes if you don’t have time to read a whole section of the report and just want the gist of it.
The purpose of this paper is to review and describe insights and techniques from behavioral economics to demonstrate how they can be applied to the everyday design of incentive, reward, and recognition programs. In essence, this paper strives to help incentives professionals design programs that leverage our best and most current understanding of h...
It will surprise no one to learn that our common human desire to avoid embarrassment, reduce or eliminate hassles, feel pride, and to fit in can be very powerful forces. Identifying and leveraging these and other human traits is the focus of behavioral economics. From an incentive professional’s perspective, behavioral economics involves identifyin...
Behavioral economics, social psychology, and neuroscience offer many more practical techniques that incentive and reward designers can use to develop more effective programs. Of course, the same techniques and tools can be used to manipulate and influence choices that only benefit the choice architect (designer) and not the target of their programs...
In attempting to achieve our goals, we have explored and integrated empirical, field-tested evidence of which nudges work in helping Professors “We build products that work with our physical limitations. Chairs, shoes, and cars are all designed to complement and enhance our physical capabilities. If we take some of the same lessons we’ve learned fr...
Simply defined, behavioral economics is the application of experimental psychology and behavioral psychology to the discipline of human decision-making, including economic decision-making. Unlike traditional economics, which, narrowly defined, assumes that human beings always make optimal, rational, value-maximizing decisions, behavioral economics ...
Why should the IRR industry care about esoteric probes into the nuances of economic decision-making? The reasons are simple and compelling. Employees make economic decisions when they decide to remain with their current employer and/or perform at their best. However imperfectly, people calculate reward for effort. They work where they receive the ...
BE instruments and tools, even principles, no matter how tested and consistent, should not be relied upon without first testing your assumptions. In other words, we may know from decades of research that social proofing works, for example. After all, merely telling people how the majority of their peers actually behave or believe (“pluralistic igno...
This paper focuses on BE principles, including nudges, and the tools and techniques most applicable to IRR professionals. To help make sense of the hundreds of BE terms, practices, and techniques, in use, the “EAST Framework,” designed by Britain’s Behavioral Insights Team 50 is referenced in Part Two as a structure for using BE in the workplace. E...
Like the museum curator who filters our choices so that we are not overwhelmed, incentives designers must find the balance between too little and too much choice. This relates to our psychological need for heuristics (shortcuts) to manage the onslaught of information we face every day. Organizations that offer good shortcuts can reap significant ga...
For the IRR professional, it is important to take heed of the availability heuristic because employees or consumers who do not see others being rewarded may consciously or subconsciously conclude that the organization doesn’t value them. Simply celebrating reward-earners—listing their names, or in the case of consumers, sharing stories about how th...
Behavioral economics has been used in sales and marketing for decades, long before it was discussed or labels were put to it in academia. Retailers allow us to buy now and pay later, fully tapping our “present bias” and our tendencies toward hyperbolic discounting. Visit any software-as-a-service website or car dealership to see how marketers use t...
But timing is often used in very subtle ways as well. An insurance company felt sure that many of its customers underreported the number of miles they drove in a year in order to receive lower premiums. Normally, insurance forms include declarations of honesty and accuracy at the bottom of the form where the applicant signs. By moving it to the top...
An IRR professional who wants to nudge top performers toward a greater appreciation of the annual group incentive travel reward, might use a combination of several BE techniques. First, they should personalize their message to specific employees (salience), next they might leverage social norms by asking some of last year’s reward earners to share ...
Unfortunately, not all of the most important BE techniques and tools fall neatly into the EAST framework above. IRR professionals should also be familiar with the powerful BE effects and techniques listed below:
At Microsoft, HR analytics has been used for years to build profiles of likely leavers and predict the attrition of key talent. The firm has become progressively better at this analysis, but according to Dawn Klinghoffer, Microsoft’s Senior Director of HR Business Insights, some of the most valuable insights have come from data on what causes emplo...
Before it makes changes or introduces new programs organization-wide, Google always tests new nudges and initiatives with small groups to see what works and what doesn’t. Google has found that experience-based rewards are usually more effective in motivating employees than other types of incentives, such as cash bonuses. The preponderance of resear...
As demonstrated in Part Two, behavioral economics principles, tools, and practices are a potent force. For their long-term effectiveness in organizations—whether with employees, partners, or customers—designers should resist manipulative or unethical uses of BE. Outside of the frequent (but short-term) experiments organizations should conduct to te...
In addition to conducting a targeted literature review of the topic, we relied on several invaluable conversations with industry leaders, academic thought leaders, and hands-on practitioners to round out our understanding of the impact behavioral economics is having and might yet have on the world of incentives, rewards, and recognition. In truth, ...
Though more than one hundred books, articles, videos, interviews, blogs, and papers are referenced throughout the footnotes in this guide, a few resources stand out as extraordinarily influential. Nitin Nohria and Paul Lawrence’s classic book Driven: How Human Nature Shapes Our Choices is referenced in each section of the paper and extensively in P...
Apr 22, 2022 · Satisficing is a decision-making process that strives for adequate rather than perfect results. It is linked to behavioural theories of the firm. Consider for example, business responses to the pandemic. Many have changed their business models away from pure profit maximisation.
Jan 17, 2017 · Understanding core economic concepts can help you expand your economic knowledge for career advancement and apply changes to improve your organization.
Sep 25, 2023 · Generally speaking, utility refers to the degree of pleasure or satisfaction (or removed discomfort) that an individual receives from an economic act. An example would be a consumer purchasing a...
