We would all like to think that our offices are full of positively motivated people, yet the reality is that some of our staffs behave in various ways that do not conform to expected good behaviour. Each individual’s behaviour is constantly adjusted due to both positive and negative reinforcement. Behavioural economics may simply confirm some of our suspicions at a surface level, but it also adds deeper insights. For example……and as we might expect, a typical employee likes to do more of the things that get a good response from his or her colleagues and less of the things that make him or her feel uncomfortable. However, each of us may also unconsciously connect each possible action to a mental picture (reification) of the probable pleasure or pain that will result, and accordingly do more or less of the action.
A manipulative employer who knows about this may use this behavioural effect to adjust employee behaviour profitably away from acceptable norms. They can, and do, replace simple reward for effort with something potentially dangerous: instrumental conditioning that offers greater rewards for doing alternative and potentially unethical “local versions” of working practices (“the way we do things around here”).
Providers should learn to be vigilant to avoid assuming that a positive risk culture is their organisation’s default value setting. One warning sign of the potential for unacceptable behaviour is a manager who is adept at easing staff into unethical practices by “normalising” non-compliant behaviours from the outset; a rule-gaming employer may even create work routines that make bad behaviour feel familiar and acceptable. People’s latent discomfort about performing a doubtful task lessens the more often they repeat the task. Over time, staff can accept and even learn to enjoy regular activities that they may know intuitively to be problematic. Add in human tendencies to want to believe whatever senior people tell us, and to blend in by copying others in a group, and it’s easy to see that staff behaviour—and the firm-wide risk culture that follows from it—are open to material manipulation.
Although the British regulator (FCA) has not yet articulated it as clearly as this, its behavioural control task has four elements: to address identified biases and compensate for them; and to challenge identified patterns of bad behaviour, then eliminate them so as to create an environment that elicits ethical conduct.
Behavioural analysis reveals evidence of such patterns in unexpected places. One of these is in how a provider uses language. In the past, industry jargon has created a careless mode of engagement that customers (and reforming governments) find quaint and somewhat insulting. For example, the expert culture that classifies and registers good behaviour as “risk” may be technically correct, but such an apparently contrary use of language (“risk” here meaning “customer benefit”, in plain terms), leaves outsiders puzzled.
It’s just one example of how financial markets’ engagement with human factors of risk has evolved in a parallel universe of separate elements: in one silo, anti-money laundering staff are mandated to “know your customer” or face criminal prosecution; meanwhile, the marketing team is buffing up a new “customer-centric” offering. Truly customer-facing operators must recognise the potential damaging effect such language has on their brand value, and fix it.