Could a simple printed fly on a Dutch urinal hold the key to improving Australia’s big bank culture?
It seems like a massive stretch but those printed flies in the urinals at Amsterdam’s Schiphol airport are an excellent example of the effectiveness of nudge theory or nudging, which can make lasting and significant changes to human behaviour.
In the case of the Amsterdam urinals, giving men a challenge and something to aim for produced an 80% reduction in “spillage’’, without having to resort to tighter regulation.
American economist Richard Thaler also won the Nobel Prize in 2017 for his work incorporating psychologically realistic assumptions into economic decision making.
Thaler is one of the fathers of behavioural economics, which gets rid of the idea that individuals are always making absolutely rational decisions and replaces it with a more nuanced theory that individuals respond to a number of inherent biases and motivations and sometimes make emotional decisions.
He is also a co-author of the highly influential book Nudge: Improving Decisions About Health, Wealth, and Happiness.
Battered banks need fast cultural transformation
So, what does all of this have to do with Australia’s banks, which have emerged battered and bruised from the Hayne Royal Commission and with a significant cultural transformation task ahead of them?
According to leading banking risk and culture expert, Harry Toukalas, group managing partner of Blackhall & Pearl, nudging and other a raft of other behavioural techniques will be the key to affecting a rapid change in bank culture.
“In responding to the Royal Commission, banks and other financial institutions need to use all of the tools available to them to reduce the incidence of high-risk behaviour,’’ Mr Toukalas told Small Caps.
Nudging involves a free will choice
“Nudging is a particularly useful tool because individuals make a free choice to change their behaviour, so they have a level of commitment to it compared to listening to orders from on high.’’
Mr Toukalas said many companies have all of the right policies and expected standards of behaviour in place but still suffer devastating reputational and financial damage when individuals fell short of those standards.
“If you return from a company seminar on improving culture and talk to someone in the company you respect and trust and they say don’t worry about it, this will all blow over soon, that is the message you are likely to take away.
Culture is local and so are the solutions
“Culture is a local construct and it needs to be approached that way if you want to get meaningful change in a shorter time frame,’’ said Mr Toukalas.
He said reaching local leaders within organisations and using them to influence those around them could transform culture eight times faster than more traditional “top down” methods.
It is also much faster and more effective than relying on compliance methods such as education, legislation or enforcement through tougher penalties or regulations.
Fellow Blackhall & Pearl group managing partner, Dr Tim Boyle, said it was important to dynamically monitor culture within companies, with Blackhall & Pearl’s CONDUCT-iQ model using algorithmic analysis to produce live data.
CONDUCT-iQ looks at how organisational data is being used and the content in the data which is analysed using an advanced Artificial Intelligence (AI) model developed by the Massachusetts Institute of Technology (MIT).
“It was developed more than 16 years ago and is one of the most progressed and proven AI tools in the global market,’’ said Dr Boyle.
Australia first nudging Masterclasses
To increase the use of nudging and other behavioural economics tools in renovating risk culture, Blackhall & Pearl are running Masterclasses in Melbourne and Sydney by one of the world’s leading behavioural scientists, Dr Pelle Guldborg Hansen of Roskilde University, Denmark.
Dr Pelle developed the BASIC nudging model in partnership with the OECD and has consulted extensively to the World Bank, the European Commission and to Behavioural Insight Teams throughout the world.
He is also a director of the International Social Survey Program and co-founder of the European Nudge Network.