Behavioral economics has officially reached buzzword status. You hear it in TED Talks and the news, and several government agencies have teams dedicated to this discipline. Many of us can define behavioral economics through context: seeing economics through the lens of behavior. This definition is a good start, but there’s so much to the field.

For talent leaders, behavioral economics may be the single most important concept to understand. It can completely transform how you implement initiatives, and create genuine business transformation in your organization. Let’s go over of the major tenets of behavioral economics and how you can leverage them to move the needle at your organization.

What Is Behavioral Economics?

Behavioral economics is the field of study that uncovers the underlying reasons people make decisions and finds ways to help them make better ones. Similarly, in talent development, we are often charged with helping employees make choices that help them grow and improve — which we know can be a struggle.

For example, if your data showed that sales managers who participate in manager training have a 15% increase in sales revenue, you would think that sales managers would be jumping in line for training. However, even in this type of environment, learning leaders can find it challenging to convince them to do so. Behavioral economics tells us that giving people information does not bring about behavior change; their environment and the context in which they make decisions has a much greater impact.

Let’s explore some tenets of behavioral economics and how to incorporate them into your organization’s learning and development (L&D) strategy.

Give Them a Nudge


A nudge is precisely what it sounds like — a gentle push toward taking a desired action. Nudging uses subtle and indirect ways to influence the behavior and decision-making of groups or individuals. Nudges are often reminders, such as a phone or phone notification. When paired other behavioral tents, such as social norms, they can help encourage desired behaviors.


For example, the U.K. was trying to find ways to encourage households to reduce energy consumption and conducted an experiment in which residents received a nudge in the form of an energy bill that included information comparing their energy use with their neighbors’. Over time, the experiment saw a gradual reduction in overall energy consumption in the homes that received this modified energy bill.

Application to L&D

Think of ways you can leverage social norms and nudge your employees to make better choices. Can you show them their learning achievement compared to others’? Perhaps you can send a newsletter sharing learning goals and achievements across the company. This nudge is a great way to demonstrate that learning is the norm at your company and build a thriving learning culture.

Loss Aversion


Loss aversion is the idea that we tend to feel the pain of loss greater than the joy of gain and react more strongly to the prospect of losing something than to the opportunity of gaining something.


Let’s say you play a game in which you gamble your next paycheck based on the flip of a coin. If the coin lands on heads, it adds 50% to your paycheck, and if the coin lands on tails, you lose your paycheck. Would you be willing to play? Similar experiments tell us that a majority of us would rather not lose what was promised to us, even for the possibility of a better outcome.

Application to L&D

Many L&D offerings focus on what employees can gain from learning opportunities — more skills, tuition reimbursement, learning credit. What if there were ways to reframe our offerings to share what employees stood to lose by doing nothing?

For example, through the Learning Stash program, Novetta employees can leverage up to $5,250 toward education expenses each year. Using language that involved gaining a learning opportunity, participant rates remained low, with around 10% of employees leveraging this benefit.

Since the funds are renewed each year, if employees don’t use them, it’s a loss. Novetta launched a campaign using phrases such as “don’t lose your learning stash” and “learning stash: Use or lose it!” Repositioning the program in this way led to almost a 30% increase in use in the following year.

Loss is effective, but use caution and restraint so you don’t turn it into fear-mongering!

The IKEA Effect

This tenet is one most of us can appreciate. We tend to put a disproportionately high value on things we create, either partially or fully. The name of this concept comes from Swedish manufacturer and furniture retailer IKEA, which sells many furniture products that require assembly. IKEA provides some basic tools, some nuts and bolts, and a set of instructions, but it’s up to its customers to put it all together.


In an experiment, participants who assembled a small box were willing to pay $0.78 for it, while those who didn’t assemble the box would only pay $0.48. In other words, building the box was worth 63% more than receiving an assembled box. People who built boxes also liked them more — 3.81 on a scale of 1 to 7 compared to 2.5.

Application to L&D:

In the context of the workplace, value translates to engagement, and engagement is a key driver of performance. When employees are involved in building learning, they value it more and engage with it more readily.

Talent development leaders often feel that they need to prescribe all of a learning initiative. However, by thinking ahead and providing tools for employees to create learning, you can help ensure that development programs are highly engaging and well received.

For example, in a Novetta leadership development program, participants create and share a “TED Talk” with the class and select the topic of one of the modules. Instructors also change the ebb and flow of the agenda based on what the participants feel is important at the moment. The result? Not only does the leadership program meet organizational objectives, but learners rate the experience highly.

Wrapping Up

Behavioral economics has a lot of offer L&D, and more and more organizations are waking up to the reality that behind all the strategies, all the key performance indicators and all the data analytics are people. We must become people experts in order to make an organizational impact. By learning and experimenting with behavioral economics, you can make your seat at the table so influential that no key meeting will start without you.