The Psychology Of Work: How Loss Aversion Can Be Applied In The Workplace, How To Drive Behavioral Change, And Influence VS. Free Will

The Future Of Work With Jacob Morgan

Jordan Birnbaum is the VP and Chief Behavioral Economist at ADP. In his role, he is responsible for the integration of behavioral economics into software design and marketing communications of new talent-based products. Birnbaum has more than 20 years experience as a start-up specialist and entrepreneur, as a Founder / Senior Vice President at Juno Online Services and Founder / CEO of The Vanguard, Los Angeles. He holds a BS from Cornell University and a Master's degree in I/O Psychology from NYU.

ADP – Automated Data Processing - began in the 1950's. It is a Fortune 500, company with 50,000 employees worldwide. 1 out of 6 people gets paid by ADP. They have adapted and evolved to look at down the road at the art and science of providing payroll.

"Behavioral Economics is putting 'would' in front of 'should'". The idea is to improve the predictions of human reactions to just about anything. Being able to define 'the should' is critical.

When it comes to loss aversion, "human beings are twice as motivated to avoid a loss as we are to secure a gain." So it is twice as motivating to avoid losing $100 than it is to gain $100. The impact of gaining it is only half as impactful.

How can managers and leaders apply this in a company? Through communications.

An example of Loss Aversion:

Trying to get people to participate in leadership development programs. Two sentences and understanding how to frame:

1. Consider all the career advancement that you stand to gain if you were to improve as a leader.

Or

2. Consider all the career advancement that you stand to lose if you don't improve as a leader.

Changing just 2 words makes the second sentence twice as motivating as the first. So understanding how to frame things relative to what we stand to lose versus what we stand to gain is often the difference between success and failure.

Birnbaum's advice to listeners is to realize that 'should' is not a very good predictor and he says behavioral economics is a great party topic!

What you will learn in this episode:

• The power of saying..."but you are free to decline."
• What role Priming can play in business, marketing and other spaces
• What is a Heuristic method and its role in behavioral economics
• What consistent irrational behaviors we should be aware of
• How to drive behavior change in the workplace
• How loss aversion can be used by managers