Are You Being Nudged Into Compliance?

Updated: Jan 22, 2019

The answer is yes and you have been for some time.


Nudging is broadly used today in many domains including: government to addresses policy effectiveness and regulatory gaps, private companies to make employees more ethical, and in compliance to change safety, quality, and environmental cultures.

Nudging can be effective and justified to get us to do what is good for us such as investing more for our retirement. Nudging can also be used to exploit our behavioral biases to achieve outcomes that we do not need or want.

The use of nudging in compliance strategies has ethical implications that need be to considered and addressed. Companies may not explicitly implement nudging and still find themselves using technology that does and these may not align with their own ethical values. The use of nudges in technology makes technology no longer amoral. The values of the users are being replaced with the values of the nudge designers and this is cause for concern.

Many people became aware of the theory of nudging when the book: "Nudges: Improving Decisions About Health, Wealth, and Happiness" by Richard Thaier and Cass Sunstein, was published in 2008. In their book, they define nudges as:

"A nudge, as we will use the term, is any aspect of the choice architecture that alters people's behavior in a predictable way without forbidding any options or significantly changing their economic incentives."

In essence, nudges use behavioral insights to influence behavior towards specific outcomes.

Nudge theory has been applied in areas as diverse as: product placement, using opt-out versus opt-in strategies, and applying it to business management systems. We also see private companies introducing nudging aimed at making employees more ethical. More and more companies are considering the use of nudges as a proactive strategy to achieve compliance outcomes [8]. In Todd Haugh's paper on "Nudging Corporate Compliance" [5] he defines nudges in the compliance context:

"Nudges are simple interventions designed to promote desirable choices— such as compliance choices—by taking advantage of psychology . . . [including] a growing list of mental shortcuts, cognitive biases, and psychological quirks that subconsciously influence, and often sabotage, our decisions. Nudges are designed to either harness or neutralize these tendencies, and help us make better decisions, by subtly altering the decision-making process or the mental context in which the decision is made"

Neutralizing cognitive biases to make better decisions seems reasonable but harnessing these same biases to achieve a specific outcome has its problems. Critics of the use of nudging argue that they are short-term and do not help people make long-term behavior changes. However, while the effectiveness of nudging might be in question, there are other issues more pertinent to the ethics of using nudging in the first place. In the paper by David Colader and Andrew QI Lin Chong [7], they make the following argument:

"Thaler and Sunstein implicitly assume that people would be better off with a choice architecture that encourages them to save more. By making this and similar assumptions, they are replacing their views for the consumer’s views. Our argument is that the explicit goal of nudge policy in this case should not be to encourage individuals to save more; rather it should be to give individuals the choice of whether they want a choice architecture that is more likely to encourage to save more. This is a subtle, but important, distinction that Thaler and Sunstein gloss over, and which underlies the difference between our non-paternalistic and their paternalistic nudge policy."

The key point is that choice architectures inherently promote a set of values that may differ from those of the decision maker. This has critical implications when applied to making ethical decisions involving risk and uncertainty where it essential that the decision making process not diminish the autonomy or the accountability of the decision maker. It can be argued that too much "suggestion" may lead to holding the choice architects rather than the decision maker accountable which is not what we want or need.

As a result, careful attention should be given to the use of choice architectures particularly those embedded in the technology (i.e. digital nudges) used to support and manage compliance. There are many ways in which choice architecture manifests itself in the digital environment. The most predominant is the use of defaults[1] as expressed through:

  • check boxes,

  • drop downs,

  • auto complete,

  • search results,

  • default settings,

  • timelines,

  • call to actions

All of these have defaults that are pre-selected. When you see these you are being nudged. For example, more people select the auto complete suggestion than what they were originally typing. What is suggested can and does nudge users towards a specific outcome. The most popular example regarding defaults is the impact of default choices on organ donations compliance rates. Countries where people where asked to opt-out of organ donation instead of opting-in reported significantly higher consent[9]:

There are several aspects that companies should consider when considering the use of nudges, beginning with:

  1. Is the outcome what we want and need?

  2. Is the level of persuasion used in the nudge consistent with our ethical values?

  3. Is the autonomy and accountability of the decision maker preserved in the process?

Nudges should by definition be easy to avoid [6] and no costlier than accepting the nudge itself. When the cost to avoid is higher, the nudge becomes a shove which is a form of coercion.

Sunstein[6] posits the following distinctions for nudges with respect to ethical considerations:

  • Paternalistic nudges – protect people from their own mistakes including behavioral biases

  • Educational nudges – inform so that people can make better choices for themselves

  • Nudges that enlist or exploit behavioral biases

He further writes, "It follows that the most controversial nudges are paternalistic, non-educative, and designed to enlist or exploit behavioral biases."

Nudging is a method of control within a spectrum between persuasion and coercion. The difference between persuasion and coercion hinges on whether or not you are free to decide if you need and want the outcome; and there in lies the rub. At what point does nudging become forced and in violation of a person's autonomy and accountability. Where you draw the line is a decision that companies need to make as part of their ethics policies. They should not let technology determine for them where this line is and even what the outcomes are.

As companies continue to investigate the incorporation of nudging in their compliance programs it is incumbent on them to establish ethical policies and guidelines to govern their use.

Ethical companies should at a minimum:

  1. Develop a plan for how they will address the use of nudging within their compliance programs

  2. Decide what is ethical and what is not (don't let the technology choose this for you)

  3. Evaluate how nudges are used in existing and new technology:

  • Where are they used?

  • What outcomes are being influenced?

  • Can the outcome and the level of persuasion be changed to better align with compliance obligations and core values.

  1. Require that if and when nudges are used they are consistent with ethics policies and guidelines

Further reading:

  1. Digital Nudges, Fabio Pereira, Presentation at GOTO Conference, https://gotober.com/2017/sessions/303

  2. The Persuasive Power of the Digital Nudge, Julia Fetherston, https://www.bcg.com/en-ca/publications/2017/people-organization-operations-persuasive-power-digital-nudge.aspx

  3. Digital Nudging – Guiding Judgement and Decision-Making in Digital Choice Environments, Markus Weinmann, https://link.springer.com/article/10.1007/s12599-016-0453-1

  4. Digital Nudging: Altering User Behavior in Digital Environments, Tobias Mirsch, Chistiane Lehrer, Reinhard Junk, https://link.springer.com/article/10.1007/s12599-016-0453-1

  5. Nudging Corporate Compliance, Todd Haugh, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3004074

  6. The Ethics of Nudging, Cass Sunstein, http://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?article=1415&context=yjreg

  7. The Choice Architecture of Choice Architecture: Toward a Non-paternalistic Nudge Policy, David Colander and Andrew Qi Chong, http://sandcat.middlebury.edu/econ/repec/mdl/ancoec/1036.pdf

  8. Cast no shadow, Dr Tim Marsh, http://www.rydermarsh.co.uk/pdfs/SHP.0112.pdf

  9. Nudge Database v1.2, Mark Egan, https://www.stir.ac.uk/media/schools/management/documents/economics/Nudge%20Database%201.2.pdf

#EthicalCompliance #DigitalNudging #Nudging #ComplianceStrategy

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