A nudge in the right direction

By — on / Negotiation Skills

Adapted from the Negotiation newsletter.

A bank in the Philippines started a program that encouraged would-be nonsmokers to open savings accounts and, for six months, deposit the amount they would have spent on cigarettes. Customers who tested clean for nicotine after six months got their money back; otherwise, the funds were donated to charity. The program achieved a higher smoking-cessation rate than the nicotine patch.

In this story, an organization took steps to encourage others to make a beneficial choice-giving up smoking-that they might not otherwise have made. In their book Nudge: Improving Decisions About Health, Wealth, and Happiness, Richard H. Thaler and Cass R. Sunstein make the case that just about anyone can become a “choice architect”: someone who, with a little creativity, nudges people to make smarter decisions for themselves.

All of us are susceptible to biases that lead to flawed decisions, including overconfidence in our judgments, an irrational preference for the status quo, and many other cognitive mistakes we’ve covered in this newsletter. By anticipating how such biases will influence our decisions, we can set up systems designed to capitalize on them. When automatic enrollment becomes the default choice for a retirement plan, for instance, most people will not make the effort to change from the status quo-and they will secure a much safer retirement than they would have otherwise.

Organizational decision makers would do well to build wise nudges into their negotiated agreements. If the U.S. government mandated an opt-out program for organ donation, for example, rather than the voluntary donation system in effect in most states, only those who truly objected to donation would make the effort to decline to participate. Many more donors would become available, and many more lives would be saved, argue Thaler and Sunstein.

In your daily negotiations, you may be able to find creative ways to nudge those you’re responsible for to make better choices. You might adapt the Philippine bank’s antismoking campaign to your office, for example, and offer rewards to those who kick the habit.

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