rotmanmagazine.ca / 5AT ITS CORE, every organization is in the same business: changing
behaviour. For-profit companies try to sway consumers to buy
their products; governments try to convince citizens to pay their
taxes on time; and an NGO might want to encourage families to
sign up for tuition support for their children.
Unfortunately, in most cases, leaders spend too much time
on the initial stages of the behaviour-change process: analyzing
the market, creating a strategy, and developing a product or ser-
vice. They pay far too little attention to what Rotman Professor
Dilip Soman — who heads up Behavioural Economics in Ac-
tion at Rotman (BEAR) — calls ‘the Last Mile’. This, he says, is
where ‘the rubber hits the road’: Whether it happens online or
in a brick-and-mortar environment, it is where the consumer
makes a choice to take action — or not.
Traditional Economics assumes that people are much like
the robot featured on our cover: We have infinite computational
ability, are unemotional, impervious to loss and have an uncanny
ability to assign ‘utility’ to everything we consume. The truth, it
turns out, is much messier: Behavioural Science shows that hu-
mans are myopic and impulsive; we are heavily influenced by
other people and by the status quo; and emotion, context and
loss-aversion — amongst other things — guide our decisions.
Understanding these dynamics can help to explain current
behaviours and influence future ones. In this issue of Rotman
Management, we seek to expand your understanding of behav-
ioural insights and how they can be applied to achieve your orga-
nization’s goals.
Public officials around the world are embracing behav-
ioural insights to increase compliance, protect the environment
and more — as Prof. Soman et al. show in Policy by Design,
on page 6. The UK government is widely considered to be the
global leader in the application of these insights, and on page 32,
David Halpern, head of its Behavioural Insights Unit, describes
the most powerful way to get someone to do something, in
Changing the World, One Nudge At a Time.
Cognitive biases are an issue in every industry — but per-
haps even more so in financial services. That’s because financial
products are complex in nature; the payoffs usually occur over a
long period of time; and money is an inherently emotional topic.
On page 56, Kent Baker and co-authors look at How Behav-
ioural Biases Affect Finance Professionals.
Elsewhere in this issue, we feature Nudge co-author Rich-
ard Thaler in our Thought Leader Interview on page 14; and
in our Idea Exchange, the University of Pennsylvania’s Angela
Duckworth looks at how ‘grit’ relates to success on page 97; Rot-
man Professor Nina Mažar interviews Varun Gauri about the
World Bank’s behavioural initiatives on page 113; and Rotman
faculty Lisa Kramer, Bing Han and Avni Shah discuss their re-
search findings.
As our contributors demonstrate in this issue, wherever
human behaviour is involved, there are opportunities for be-
havioural insights to overcome organizational challenges. And
as their evidence indicates, this is something business leaders,
policymakers and governments alike should be thinking a lot
more about.A FINAL NOTE: This issue marks Rotman Management’s 10th anni-
versary. We have now published 30 issues in the current format
— all of which can be purchased on our website (rotmanmaga-
zine.ca). Thanks to all of our readers for your support to date. We
look forward to bringing you the latest in business thinking for
years to come!FROM THE EDITOR Karen Christensen
The
Behavioural
Issue
Karen Christensen, Editor-in-Chief
[email protected]
Twitter: @RotmanMgmtMag