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Harnessing the Power of Behavioral Economics in Talent Acquisition
HR TechnologistTo review the original article click here 2nd May 2019
While the power of behavioral economics has long been harnessed in business, we have not yet fully explored how this science can be applied to talent acquisition.The disparate and diverse challenges facing the talent ecosystem are well documented. Technology is often hailed as a ‘magic’ solution to the challenges that HR practitioners face in implementing and managing effective people strategies. However, without a firm understanding of innate human drivers that influence the behaviors of employees and candidates, investment in digital tools is unlikely to have any meaningful impact on the success of talent strategies.
Across the U.S., businesses continue to struggle to recruit the skills they need to thrive. According to recent data, a typical engineering position, for example, takes an average of 60 days to fill – and there are over half a million engineering jobs open across the country. In order to attract and secure hard to source skills, talent acquisition teams must provide employer brand messages - and a candidate journey - that truly resonate with the audiences they are seeking to engage. And in order to do this effectively, harnessing the power of behavioral economics is crucial.
Founding father of behavioral economics, Richard Thaler, introduced the concept of ‘nudge points’, through which peoples’ behavior can be influenced by making subtle changes to the context in which they make decisions.
Historically, it was widely believed that most, if not all, human behavior could be easily explained by relying on the assumption that our preferences are well-defined, rational and stable across time. However, this is not the case. We now know that the brain is a democracy, with no dominant decision maker. And while businesses are increasingly capitalizing on this revelation, talent acquisition teams are not yet taking full advantage of this fact.
A vast body of research within the field of behavioral psychology offers valuable insights into irrationality and how individuals experience service interactions – how information is presented can alter decisions on how individuals should - versus would - behave.
Today, if you walk into a grocery store, the milk and bread are at the back, complementary items are grouped together, premium items are at eye level and ‘impulse’ items are near the cash registers. This is done to entice your senses and hedonistic tendencies as you place more items in your cart in your journey to the back corner of the store and back to the check-out counter. Next time you are in a grocery store, take note of how many times you bend over, stretch or reach for an item. It’s why you walk in only needing milk and bread and walk out with over $100 in groceries. While retailers understand consumer behavior and use this knowledge to their advantage, behavioral economics are not yet used during the recruitment process at all.
And it is not just stores which are tapping into behavioral economics to influence the choices consumers make. A recent Forbes article highlights how the ‘decoy factor’ has been successfully used in promoting a particular magazine subscription option. Potential customers were originally given two subscription offers for The Economist: an ‘online only’ subscription for $56, and ‘online and print’ for $125. Readers overwhelmingly chose the former. However, when a third ‘decoy’ option was added - $125 for print only – option two became significantly more attractive.
Or consider the default rule when comparing organ donation rates in two similar countries, Germany and Austria. Germany which uses opt-in, only 12% of citizens give consent, wherein Austria which uses an opt-out system, nearly 99% gave consent, according to BehaviouralDesign.com. Imagine the possibilities with talent pools if the default rule were applied to the talent acquisition process.
People want options – and they want reference points to compare these options against – but, for too long, rigid role specifications and prescriptive working hours have meant that this variety simply hasn’t been offered to jobseekers.
That’s not to say that behavioral economics isn’t already being explored in other areas of talent management. PwC’s paper, Behavioral Economics: Human-led design to improve your bottom line, for example, advises how the science should be leveraged within the function to inform strategies in areas such as getting staff back to work and increasing pension contributions.
We simply need to extend this thinking to influence how we manage not only existing employees, but also potential recruits. The bottom line is that talent pools are too segmented and certain options are simply not suggested to people because they are in a particular ‘box’. Default to hiring full-time is outdated and redundant. Make it default that all roles have the potential to be temporary, permanent, remote or job share and there will be more applicants – and technology is key to managing this change.
In addition, today’s digital capabilities mean that once these jobseekers are engaged, programmatic technology can be used to monitor how they are interacting so that tailored content can be suggested – just like in a store.
This approach can be particularly effective when managing contingent workforces. However, while technology does hold the key to boosting both engagement and workforce management, it is worth noting that both legacy enterprise resource planning (ERP) systems and contemporary ‘self-service’ tools, which promise valuable talent analytics, are often ineffective.
Talent acquisition specialists must think innovatively and work with other disciplines within the organization to first determine what they are looking to achieve through the use of technology. It is only then that they can buy, build or borrow systems to specifically meet these needs.
For example, if you are a product company, most of your candidates are potential consumers of your brand too. Why not consider linking marketing and recruitment efforts by offering promotional incentives as a ‘thank you’ for joining the talent pool, in the same way that consumer marketing teams reward purchases loyalty and birthdays, or prompt customers to complete a purchase when items are left in their virtual shopping cart? A candidate will always be a champion for your brand if they are treated with the appropriate care. The consequences of not doing so could be detrimental.
Talent acquisition strategists need to think outside the box and join the dots, using technology to harness all the data at their disposal. Social networking platforms are reactive tools where birthdays, career history and length of tenure are all publically available. However, while many platforms promise to capitalize on this data to pool and pipeline talent, we are yet to reach a place where we are taking full advance of the information at our fingertips.
We need to marry technological capabilities with an understanding of human psychology to shape how potential candidates feel about an organization, engage with the brand and – consequently – make decisions about their future career.
Through platforms such as LinkedIn, we can determine what the average tenure is at any given firm, or within a particular function or role. Profiles can then be analyzed to identify potential recruits who are approaching a time when they are statistically most likely to move on to their next job. These individuals can then be segmented to receive the message, ‘Hey, I know you’re not working for us, but we just wanted to congratulate you on your work anniversary’. Similarly, we know that retention of staff often becomes an issue once a line manager moves on – engaging with these people, at this particular time, could pay dividends. The information is there, but we’re just not using it in the right way yet. However, through applying behavioral economics to the methods used to attract and engage talent, HR strategists can ensure that they are ‘nudging’ candidate decisions in a way which benefits their own workforce and wider organizational goals.
The consumerization of talent management is now well established – yet the use of behavioral economics in recruitment remains one of the final frontiers. Yes, technology is the answer to improving efficiencies and boosting effectiveness in talent acquisition – but the complexities of human behavior must be front and center when developing strategies to build future-fit workforces.Go to Alexander Mann Solutions LIVE