Change Management & Behavioral Economics

Change Management is a pretty hot topic these days. You can't seem to be involved in any type of larger project without the discussion around change being put onto the table (and rightly so).

Our organizations are made up of large numbers of individuals, and when we look to make transformative change, we are impacting many different processes and workflows which in turn impact larger and larger numbers of employees.

Trending approaches today are heavily focused on communication. Basically get top level buy in, have that pushed down through each level of management, communicate changes, be transparent and try to make people feel "included" in the change (it is more complex then than that, feel free to Google to your heart's content for more information).

The challenge or question for me however, sits more on the initial assumption that people will accept change once they understand it and see the value of the change for the organization.

So then why is it so hard, if all we have to do is explain the change and make sure we are effectively communicating it?

My personal view on this is here:

People are not necessarily resistant to change, they just prefer comfort; but it is more comfortable to do what you know, knowing your status and how you fit in, than rationally accepting change for the organization.

An opportunity I see to improve the effectiveness of Change Management would be to adopt and integrate notions from psychology and behavioral economics, namely Endowment Effect, Loss Aversion and Status Quo Bias

Endowment Effect: This bias occurs when we overvalue something that we own, regardless of its objective market value

Loss Aversion: The pain of losing is psychologically about twice as powerful as the pleasure of gaining

Status Quo Bias: People prefer things to stay the same by doing nothing or by sticking with a decision made previously 

For a change to happen within a person, we must find a way to demonstrate the gain is more than what they will lose (or perceive to lose), and it is necessary to demonstrate that their status quo is not better than what the proposed changed will bring.

Add to the potential for rapid success by coupling the concepts above with principles of today's marketing; if you can’t market a product to everyone, the idea that you can’t be everything to everyone, the question is why then do we still treat organizational change with an “everyone” approach?

Everyone will most likely have to get on board at some point, so the end goal is correct, however trying to get everyone’s buy in all of them at the same time is flawed.

Check out this recent clip from Simon Sinek that frames this idea in a similar way:

Simon Sinek: Culture Change

Change management (and culture change) happens then from the smallest viable market (in the initial stages), building success stories and working with positive momentum. 

Kotter highlights the need for small wins. Focus on managing change in phases, utilizing "pilot" projects or departments where you find higher concentrations of your early adopters.

Please don't forget however that at the end of day, you are still dealing with people, and being able to connect or resonnate with them on an emotional level is required as well. The book "Heart of Change" does an excellent job highlighting strategies and considerations that organizations should take to personalize the change experience.

Next time you are responsible for leading change, consider these points and see how the outcomes change.service / plan