Behavioral Economics and behavior change in the company

I have long advocated that behavior change is the New Frontier of company ethics programs. I’ve described it to my clients as the heart of “Compliance 3.0” (if the heart of v1.0 was the employee handbook and v2.0 was the code of conduct). It’s a hard nut to crack, but not rock hard. Just needs some attention to detail.

Whether an C-suite exec embraces this idea, that her company’s programs can actually affect the behavior of team members, is not a bad indicator of whether her company’s dedication to ethics and compliance is cynical or sincere.

In this light, some nice thinking about behavior change — and that it is for real — from perennial compliance thought-leader Jeffrey M. Kaplan. He gives it in an interview with compliance professional and recruiter Maurice Gilbert, in Gilbert’s meaty new website, Corporate Compliance Insights. Kaplan’s point is that the ideas of behavioral economics, a fundamental tenet of the Obama Administration, can and should be applied to leading one’s company toward ethical behavior:

“[T] need for strong C&E [compliance and ethics] programs has often been questioned based on the assumption that ethical decisions are driven almost entirely by character, and this view hurts C&E program efforts because character is largely beyond the reach of such programs. What [behavioral economics] shows is that this view is incorrect, and that by impacting in a positive way the situations in which ethical decisions are made – which is what truly effective C&E programs do – ethical “results” can indeed be significantly improved.”

Something for Execs to keep in mind if they need rebuttal evidence against the cynics.

Kaplan refers to an experiment that took place on the campus of my old client, the Princeton Theological Seminary. It found that people were much more likely to act like true Good Samaritans to a person in distress… if they were not running late.

It reminded me of an example used by Randy Cohen, author of “The Ethicist” column for The New York Times. Cohen basically says he has faith that ethics can be fostered by processes thanks to a small change at Penn Station in New York City. Used to be that it was a free-for-all to catch a cab on 7th or 8th Avenue next to Penn Station and Madison Square Garden. People would push and cut in and make cab-catching hopeless for anyone standing down the arterial flow. Then they put in a cab line on the sidewalk along each Avenue, with a painted line (or now, sometimes, a wimpy barricade) to mark where to stand in line and — presto! — people willingly and orderly got in the line and waited their turn. The non-compliant received social ostracization from their peers. No line attendant necessary.

Says Cohen in one interview:

“Now people stand in line-because you gave them a structure that made it possible for everyone to behave equitably and civilly to one another. People still cheat, but most don’t. It’s extraordinarily inspiring. There’s no fear of getting caught by the police. People do the right thing because they want to do the right thing and because they see those around them behaving ethically.”