Can We Nudge Employees For Organisational Change?

The efficacy of organisational change frequently falters due to employees’ reluctance to embrace structural and functional modifications and workforce restructuring, i.e., mergers, acquisitions, and downsizing, leading to the prevalence of disruptive workplace environments. Despite the global acknowledgement of the detrimental impact of organisational change on employees’ professional and personal lives, an astonishing one-third of employees in the United States remain unaware of the underlying reasons behind organisational changes, as reported by the Harvard Business Review. Thus, this unawareness impedes their ability to embrace organisational changes fully or stay motivated. 

The prime question arising here is whether nudging-based motivational techniques influence employees to adapt to the complexities of organisational change.

According to a recent study conducted by Müller et al. (2023), employing a combination of nudging techniques to influence employees’ decision-making through positive reinforcement, such as feedback as well as financial incentives, i.e., rewards and pay-for-performance, often motivate employees to conform to organisational change. However, the study’s findings also indicate that financial incentives serve as a more beneficial strategy than the former.

While financial rewards emerge as powerful motivators for employees and aid organisational change, they are entirely performance-contingent. In 2022, McKinsey & Company accentuated that financial incentives promote employee retention while also encouraging employees’ outperformance and strengthening their ability to adapt to transformational shifts, as 80% of these incentives directly impact an organisation’s overall performance. 

Conversely, the nudge theory suggests that nudges tailored to employees’ individual needs not only enhance employee motivation but also shape their perception and foster adjustment. An experiment studying the effect of nudging, conducted by Virgin Atlantic, aimed at reducing the organisations’ fuel consumption and improving their ESG rating. The results proved that the intervention was cost-effective as it outperformed other carbon abatement technologies and was valuable in driving change management among employees. Similarly, the UK government conducted an experiment studying employees’ delayed participation in pension schemes. The government made employees' enrolment in default pension schemes mandatory, resulting in an additional 5 million savers in the UK. This demonstrated the power of government-based intervention in driving significant employee behaviour change. 

These examples exemplify the efficacy of nudging-based techniques in influencing employee perception and their journey of successfully adapting to organisational change while also showcasing the potential of financial incentives in facilitating smooth organisational transitions.

References

Müller, M.M., Bohm, K.L., and Renz, E. (2023). ‘Pay or nudge employees into change? A theoretical and experimental investigation of the effect of nudging for organizational change.’ Managerial and Decision Economics, pp. 1-30.