Sure, Obama’s got a tough task ahead of him. He’s also looking at the challenges in a smart way by understanding fundamental behaviour changes that could trigger desired results. Of course, with as much as 80% of the health-care budget being consumed by five behavioral issues – too much smoking, drinking, eating, and stress, and not enough exercise – there is a lot that can be gleaned from behavioural economics, and how it can enable us to change behaviour to effect the desired outcome.
Just today, Jim Clifton wrote in the Economic Times, Corporate Dossier, about how behavioural economics is starting to make its presence felt in the boardroom.
Clifton drives home the point by emphasizing that smart corporate leaders are recognizing that to take a company a notch higher, they need to look beyond the traditional theories, and behavioural economics appeals to people like them.
He explains this well with the example of Best Buy. The company reframed its employee evaluation on their levels of engagement (with customers) at work and linked it to compensation. The good thing about this is that people have far greater control over engagement, as compared to profitability. Pushing engagement built up commitment within the employees to increase engagement levels, and as a result strengthened their connection with the customer.
A simple reframing of mindsets, leading to changed behaviour. That’s all it took.
Clifton reiterates the significance of behavioural economics in achieving organizational objectives. According to him, by leveraging human behaviour, it is possible to grow by almost 30-40% without making any additional investments of any sort. This will also enable CEOs to realize their full potential and enable them to question status quo and look for alternatives to classical theories.