HR at a crossroads? Time for a better lens

Posted by Jim Guszcza on January 13, 2017

HR practices are often based on outdated ideas of human psychology and organizational design. When it comes to hiring decisions, employee motivation, and helping workers make better choices, behavioral insights and evidence-based practices can drive a new generation of HR strategies.

By focusing on designing HR practices, policies, and programs with an insight-driven advantage, practitioners can both reflect our best understanding of human psychology, as well as test and validate top-notch HR practices you can pull into the boardroom. So, how can you embrace a behavioral insights movement?

  1. Play Moneyball (bounded rationality): The human mind relies on storytelling—not statistics and logic—to make everyday decisions. When it comes to hiring and promotion decisions, even simple predictive models can run circles around unaided professional judgment. Gut feelings are notoriously inaccurate at predicting future behaviors.
  2. Nudge your colleagues (bounded willpower): Understanding the nuances of willpower gives HR leaders a powerful new toolkit—called choice architecture—to help prevent bureaucracy and help employees make better diet, exercise, and investment decisions.
  3. Leverage intrinsic motivation (bounded self-interest): HR leaders can improve business performance by recognizing that reward-based motivators have far less impact on actual performance and collaborative activity than traditionally thought.

These principles offer a framework to drive a new generation of HR strategies that can create happier, more motivated, and higher-performing teams. Let’s take a closer look.

Bounded Rationality

Companies should experiment and learn from experience to refine the hiring process over time. Gather, standardize, and analyze the data resulting from interview processes. Build predictive models to facilitate the hiring process. HR departments’ hard drives and file cabinets are filled with data that can fuel such applications: job histories, educational experience, prior employers, roles and job titles, performance ratings, and even tests and assessments. Opt for slow data-rich thinking over fast gut thinking and you’ll likely have a better formula for what to look for in your next candidate that managers may not have foreseen on their own.

Bounded Willpower

Dozens of studies have found that nudging is more effective than attempts to provide information or education. We can design environments in ways that prompt—nudge—people to take short-term actions that are consistent with their long-term goals. Examples include encouraging people to use the stairs at work by centrally locating them; automatically enrolling employees in retirement savings accounts (requiring them to un-enroll if they don’t want the default choice); and placing healthier snacks at eye level and making them more visually appealing than sweets.

Bounded Self-Interest

Humans are motivated by peer recognition, respect, freedom to contribute, and the sense of self-esteem—not just a bigger paycheck. HR departments should be A/B testing new ideas to see what policies, programs, and messages best motivate people. HR owns the choice architecture of the workplace and should design it carefully, iterating and using data wherever possible. Think about people from the inside out; begin with psychological insights about what motivates superior performance and ethical behavior, like mastery over a craft, opportunities to be creative, the desire for autonomy in going about one’s work, and a strong sense of purpose.

Behavioral economics provides a new and powerful set of principles to help improve the process of hiring and promoting the right people, motivating teams, and driving superior performance. HR professionals can play a crucial role in their organizations by making programs simpler, more effective, more scientific, more economically efficient—and more “human.”

Excerpts taken from HR for Humans: How behavioral economics can reinvent HR on Deloitte University Press. Read the full article.

Jim Guszcza is the US chief data scientist of Deloitte Consulting, and a member of Deloitte’s Advanced Analytics and Modeling practice. Jim has extensive experience applying predictive analytics techniques in a variety of public and private sector domains. He has also spearheaded Deloitte’s use of behavioral nudge tactics to more effectively act on model indications and prompt behavior change. Jim is a former professor at the University of Wisconsin-Madison business school, and he holds a PhD in the Philosophy of Science from The University of Chicago. Jim is a Fellow of the Casualty Actuarial Society and on its board of directors.


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