Everyone intellectually understands that change is part of life. If that’s true, why is it so difficult for us to make changes stick in our company?
I think the answer might lie in what’s known as behavioral economics. Behavioral economics is the study of why we make certain decisions and take different actions when it comes to managing our finances. The psychologists and economists who study this field have discovered an interesting principle.
People try to avoid loss first. When I want you to do something you’re likely to ask yourself, “what is it that I can lose if I take this action?” If there is any chance that you could lose something you might just decide to decline. Because you and everyone else are looking to avoid loss first, we often miss opportunities that can help us get ahead.
I found this was very true in my vending company. We decided we wanted our people to be paid for what they produced and not to exist. We thought the easiest place to start this project was with our vending route drivers. We thought that paying our route drivers based on what they sold would be a popular idea. Just in case we were wrong, we also guaranteed our drivers they would not make less than what they made the year before. I was really surprised when my idea was met with suspicion if not downright skepticism.
When I announced the program our drivers wanted to know how we were taking advantage of them. Instead of our drivers being excited like I expected, they were suspicious. When I was going through the experience of changing our pay structure I thought they were suspicious of me and what my motivations were. I felt that they thought I was trying to take advantage of them. For the life of me, I couldn’t figure out why they thought this.
Twenty-five years later I finally figured it out. They might have been suspicious of me, but they were more concerned about what they could possibly lose instead of what they could gain. Even though there was nothing that they could lose, they wondered how I was going to trick them. Their behavior was just normal behavioral economics. They wanted to protect what they had and wanted to make sure there was no loss.
I needed to deal with the perceived sense of loss first. Looking back on this experience I now know that I first needed to help my route drivers understand that they couldn’t lose anything. I concentrated on how much more money they could make. The drivers concentrated on ways they could end up with less.
This is where you and I have a problem when we try to institute change. You might first think about all of the good things that can happen if we make a particular change. Your employees are probably thinking about what is it that they could lose. Your employees just aren’t going to be excited about any change you propose until they are confident and satisfied that they’re not going to lose anything first.
Before we move towards instituting change in our companies we need to figure out how we can manage the false expectation of loss. If we don’t do this, we won’t be able to move forward with changes we know will help our company.
Besides managing for potential loss we also need to have people with the right attitude about success. Hiring the right person is always a challenge. We’ve written a case study on how to hire for unique abilities. Click on the button below and we’ll send you our case study on how you can hire the right person for the right job.