As winter ends in the northern hemisphere, many people will be engaged in the age-old ritual of spring cleaning.This year, they’re very likely to be following the guidance of Marie Kondo, a cleaning guru with her own Netflix series who has sold millions of books globally.Kondo’s method of organising, the KonMari method, consists of gathering together all of one’s belongings, one category at a time, and then keeping only those things that “spark joy” (ときめくtokimeku, the word in Japanese, means “flutter, throb, palpitate”) and choosing a place for everything from then on.
Regular readers will know that I’m on a mission to bring Behavioural Science to Compliance. As part of that, I think it’s also time to give it the KonMari treatment. Here are just a few (of the many) ways I think we can do that:
What’s in a name?
Let’s start with branding and the word “Compliance”. For me, it is far from reflective of the actual role and more reminiscent of over-zealous parking attendants and petty bureaucrats. To see quite how little joy it sparks, try inviting someone to Compliance training that isn’t mandatory or send an email entitled “Compliance update”. In fact, don’t. If you’re responsible for either, try something entirely different and do avoid using the C word. Instead, use language that at least seeks to engage the target audience, rather than scare it.
So, what would I use instead of Compliance? Good question. It’s not easy, particularly when regulators continue to specifically require the existence of “Compliance” functions. Perhaps we can take inspiration from the medical profession, who recognise some of the negative connotations of the word. As it explains here, they draw a subtle distinction between Compliance and something they call Adherence:
“Compliance” literally means following (or complying with) doctor’s recommendations for medication dosing. It implies a paternalistic role for the physician and a passive role for the patient.
On the other hand, “Adherence” means that the patient himself or herself is adhering to the proper dosing schedule, and it implies that the patient is empowered to take matters into their own hands for their own health.
Whilst I’m not advocating the word Adherence as a perfect replacement for Compliance, I do like the idea of patient engagement it encompasses.
One way we could re-brand is to ask our customers what they think. Sadly I suspect, they’d come up with less than complimentary things like “Business Prevention Unit” or “Necessary Evil Unit”. Obviously, that’s not entirely fair. But my aim in writing these blogs isn’t to be fair. Or indeed to have all of the answers. Rather my mission is to provoke discussion with the purpose of changing things. What I call Constructive Disruption.
Part of the reason Compliance has a “non-joy sparking” reputation is that all too often our processes aren’t designed with the end user in mind. Which is where I think some KonMari thinking could come in useful.
Of course, organisations need to be compliant. But they can’t be compliant of their own accord: it’s the people within them that, through their decisions and subsequent actions, will determine whether they are or aren’t. Robots tend not to read policies, though all too often it feels like they’re written more with robots than people in mind.
So when we think about Compliance, we need to do so from the perspective of the target audience, not solely from the organisation’s. Because what is easiest or best from an organisational perspective, might not be for the individual.
Take a regulation like MiFID, the EU Markets in Financial Instruments Directive; Part II of which came into force last year. I’m aware that merely name-checking a specific regulation risks me losing most of my audience. That’s kinda my point! Don’t worry though; we’re not going to go into any more detail than that. All you need to know is that it has a big impact on how Financial Services firms go about their business. Though if you work in the industry, you might need a little more than that (try the last hyperlink for starters!).
What happened in most Firms when MiFID arrived, is that it became the story and the lens through which Compliance with it was (and is ensured. What I mean by that is that it was introduced to staff by requiring them to read MiFID policies and attend MiFID training. This arguably makes perfect sense; when new regulations come in, staff need to know what the impact is on their part of the business and them individually.
But, once it’s no longer new, the interests of the organisation and staff arguably diverge. The Firm’s interest remains best served by viewing the world largely through a regulatory lens; maintaining training, policies and controls directed at ensuring compliance with MiFID. From the employee’s perspective, it becomes yet another set of rules they need to comply with, which sit alongside a host of others. Unless they’re in Compliance, they won’t be going to MiFID meetings, they’ll be going to client meetings, where MiFID is just one of the many components they need to consider.
In KonMari terms, the organisation wants to arrange its proverbial regulatory wardrobes and drawers like high-end department stores segment their clothing departments by designer brand. However, the employees who have to wear the “clothes” on a daily basis, can’t just opt to wear “head to toe” Hugo Boss or Chanel; they need to wear outfits that contain items from different designers.
I know I’ve probably pushed the analogy too far and lost those of you that weren’t put off by the reference to MiFID. But I’ll crack on regardless… With a picture. The relevance of which will become clear as we go on.
See how I tried to keep your interest? How often do Compliance materials or processes do that? Not often. .
I might not have the answer to the branding challenge, but I’ve seen one for reducing Firm-centricity. My friend Maarten Hoekstra’s Broccoli approach to Compliance is built around a user-centric approach which focuses on “moments”; real-life situations that are recognisable to the average employee. Like “prospecting a new client” or “working in another country”. Training and support are framed and delivered through the lens of these “moments”, rather than the lens of the underlying regulation. Much better.
If we speak to people about real-life situations in which they are likely to find themselves, they’ll be much more engaged than if we codify a world into unrecognisable theoretical situations. As Maarten once told me: the world isn’t black and white, it’s grey. Rather than pretend that it is, we should help them navigate the grey.
Context isn’t the only area where Compliance could improve. How we say things is equally important.
Tone of Voice
Often how Compliance policies are communicated to employees exploits a perceived asymmetry of power between policymakers and the “supplicant” users of their policy. Too frequently, minimal effort is put into making the content engaging or relevant. I’ve blogged before about the overuse of the term “regulatory requirement” which sparks no joy and serves to do little to improve the quality of Compliance.
There’s no reason for Compliance requirements or training to be written or delivered in dull, tedious technical terms. In fact, there’s every incentive to do the opposite. As John Cleese, comedian and founder of training company Video Arts says:
People learn nothing when they’re asleep and very little when they’re bored.
The more important the message, the more critical it is that it engages the user. In her book, The Influential Mind, neuroscientist Tali Sharot explains that
our instinct is that if we have something important to convey, the other person will want to know. This instinct is wrong. In particular if the information is tied to a bleak message, many will actively avoid it.
Behavioural Science also teaches us that if we spend a lot of time doing something, then we attribute greater significance to it than other people do. So Compliance Officers who spend their whole days looking at a particular regulation, need to be careful not to presume that the target audience has a similar level of interest.
If we really want to engage people, then we need to ensure that the way we communicate isn’t merely informative. It needs to positively spark joy!
We live in an increasingly litigious society, and we’re used to seeing warning signs everywhere.Sometimes useful, but all too often designed to protect the organisation from being sued.We are warned that cups of coffee might be hot, that packets of peanuts might contain nuts and that beer might contain alcohol.
Compliance isn’t immune to this tendency. Vast amounts of cognitive effort are spent on telling people things they already know.Both on the part of recipients, but also on those required to transmit the messages.There’s a massive downside to this approach.The more we see warnings, the more we become de-sensitised to them.
Equally, we can err too much on the safe side and mitigate for tail risks. A good example is forcing people to do training that has little or no relevance to their job, just because they happen to find themselves working in a particular area. Personal Assistants are unlikely to find themselves needing to know the intricacies of regulations like MiFID, yet they are often forced to do training on it. Usually, because it is easier for the organisation in question or because someone has made a promise to a regulator that “everyone” will do the training.
This might seem harmless; after all, what damage can getting someone to do a 30-minute training course on a peripheral topic do? And maybe, just maybe they’ll find it useful. The answer is that it can do damage because it potentially normalises the idea that training is irrelevant and they’re unlikely to pay any attention to the subject matter, even when it is relevant.
I’m not arguing that Personal Assistants shouldn’t do training. I think they should. But I believe that a better use of their time would be to do more training than the rest of us on responding to threats like phishing emails and fraudulent calls. After all, that’s much more relevant to them, and they’re arguably much more likely to come across this, given their role is often precisely to screen inbound requests.
Each of us has limited cognitive capacity; if we fill people’s minds with things that don’t seem relevant, then we’re risking them not focusing on what really matters. The volume of content we need people to be aware of is immense and ever increasing. And If we’re hiring smart people to do smart things, then treating them like small children seems like a bad idea. After all, if you treat them like that, then don’t be surprised when they behave like them. Which really won’t spark joy.
These areas are just the tip of a massive iceberg. As we’ve seen, Compliance can spark precisely the opposite of joy: anxiety. It can often unnecessarily feel like a huge burden.
Those of us in the profession should think about that. Because we can add tremendous value to our organisations. Thoughtfully executed, with the end-user in mind, what we deliver is a huge competitive advantage and serves the interests of all stakeholders, including employees, really well.
But if it doesn’t feel that way, then we’re arguably not doing our jobs properly. It doesn’t matter what our intention is, what matters is how our target audience perceives us.
As I go about my mission of Bringing Science to Compliance, I think the principle of sparking joy is a good one. It won’t always be possible, and I’m not suggesting we become children’s TV presenters or dumb down complex issues. But it would be good if we could focus more on our target audience and at least try to spark more joy. Just because they are effectively forced users of our monopolistic service, doesn’t mean we shouldn’t work at making them more positively disposed towards what we’re doing.
If we do that, then we’ll increase the quality of Compliance within our organisations, and we’ll find it much easier to challenge them when we need to. That’s because we’ve shown them respect in how we’ve approached our role. Which means we can demand the same thing back.
The views expressed in this blog are the personal views of the author and are not made in any official capacity.
Title image (c) Netflix. All others courtesy of unsplash.com
Telling people to do something because it is a “Regulatory Requirement” is a widely used technique to drive compliance within organisations. In this article, I explore why that might not be such a good idea.
One of the fascinating aspects of Behavioural Science is that small changes to an environment can have a massive impact on our decision-making. A good example is Framing; the idea that how things are presented to us will impact how we perceive them.
By understanding how things are “framed” and what impact that has on the target audience, we can look to “re-frame” when the behavioural outcome we’re looking to achieve, isn’t what we expected.
This needn’t be complex. Presenting a medical procedure as having a 90% success rate, feels different from one that has a 10% failure rate, even though they’re the same thing. Offering a discount of 25p discount on cups of coffee when people bring their own cup, elicits a different response from us than when we are charged a 25p tax for not doing so. Here’s how the Royal Navy used it in a recruitment campaign:
By re-framing the nature of the role, they’re looking to attract people who have the aptitude but wouldn’t naturally consider applying.
As I look to bring Science to Compliance, I’m finding lots of examples where re-framing can offer us significant advantages. The language we use matters more than we might think.
Take the phrase “Regulatory Requirement” (RR). In Financial Services, and in other heavily regulated industries, it is used incredibly frequently as an explanation for why people need to do certain things or not do certain others. By RR, I don’t just literally mean those words. What I mean is the concept of citing regulation as the main justification for something.
You don’t have to look too far down people’s email inboxes to find requests or tasks which either implicitly or explicitly cite it as a justification. This ranges from specific wording like:
“In order to comply with Regulation X, you are required to do the following:”
to the more subtle:
“By doing this you will be helping us to meet our regulatory obligations”
“The results of this will be shared with our regulators”
This technique is so frequently deployed, that it is often hard to tell whether the issue is genuinely a regulatory requirement or if it is just being used as a tool to make people focus in a way that the “taskmaster” thinks they wouldn’t otherwise. Sometimes it genuinely is one. Sometimes it has a basis in what a regulator said but is down to the interpretation of an individual who has been tasked with implementing it. These interpretations can be spot on, or they can be as far from the original intent of the regulator as some soft drinks are from the fruit that is plastered on their packaging.
RR has, therefore, become a catch-all concept that contains elements of “you have to do this” and “don’t question what I’m asking”. I think that’s really dangerous.
That’s not because I think every regulatory requirement is challengeable or pointless. Far from it. The industry I work in has demonstrated on numerous occasions that leaving Firms to their own devices risks producing outcomes that are not in the best interests of society. Equally, as a former regulator, I know that regulators don’t always get it right. What they try to achieve can misfire, and there are regulations that deliver unintended consequences or which miss their target.
My objection to the concept of using RR as a justification for doing something is because it frames the activity as extrinsically motivated. What do I mean by that? Let’s take a brief detour into the topic of motivation so that I can explain.
Extrinsic vs Intrinsic
Our behaviours can be motivated extrinsically (the “ex” meaning from outside) or intrinsically (from within). Telling someone to do something is using an extrinsic motivator. Making something feel like it is a decision the person has taken themselves is deploying an intrinsic motivator. We all know intuitively that the latter is much more potent than the former.
I’ve previously cited the example of how telling a small child to wear a coat (extrinsic) can make them not want to do it; even if they intended to do so. However, telling them they’ll need to wear a coat and asking them which one they want to wear, it is much more likely to succeed. It works because the act of allowing them to choose, makes it feel like an intrinsic motivator (“I know I need to wear a coat and I’m choosing the one I want to wear”). That is more likely to spark this kind of reaction:
All too often, Compliance requirements are framed extrinsically. As a result, we shouldn’t be surprised when the small child inside our target audience occasionally rebels against what they’re being told to do. With that said, let’s get back to RR.
The danger I see in using it as the primary rationale for things we need people to do is that we send a message that the only reason we’re asking for them to be done is that the regulator said we had to. The implicit message is that, in the absence of that requirement, we wouldn’t be doing whatever it is, we’re being asked to.
This creates an “us” and “them”, with the regulator seen as the “bad guy” forcing us to do things against our will; meddling in our world. I’m reminded of the way “evil” characters are used in children’s stories and the classic line from Scooby-Doo:
“I would have gotten away with it too if it hadn’t been for you meddling kids”
Only this time it’s the regulators that are seen as the meddlers. Without their nefarious influence, this school of thinking suggests, we’d be able to do far more. I exaggerate to make a point, but we should consider the fact that the extrinsic motivator is a double-edged sword. On the one hand, the rationale for deploying it so often is that it can be incredibly powerful; it explains why parents often resort to “because I told you to” when they want their kids to do something. But, on the other hand, it destroys the positive forces that come from intrinsic motivators and it often feels like a justification of last resort.
You might legitimately ask why this matters? After all, if it gets people doing what we need them to do, then doesn’t the end justify the means? Yes and no. I accept that there are certain things that regulators require of Firms and individuals which wouldn’t happen without their interference. I mean that in the literal, rather than the pejorative sense of the word. Leave market forces to their own devices and you risk monopolies that can become exploitative. We’ve seen the dangers of Information Asymmetry, where one party to a transaction has greater information about a situation or product than the other party, in my industry. Consumers don’t buy mortgages that often, so it’s not surprising that they know far less about the market than the people selling them. Without regulatory intervention, it is easy to see how consumers might be exploited.
However, there are also large swathes of regulation that force Firms to do things which they should arguably want to do of their own accord. For example, rules that require Banks to understand and manage their risk profile appropriately or hold sufficient capital to ensure they can withstand market shocks. These kinds of rules don’t just act in the interests of society; they also serve to protect shareholders and employees by ensuring that the organisation is properly run on a sustainable basis.
I can, therefore, see that the argument for using extrinsic motivators like RR to encourage compliance with regulations that wouldn’t come naturally to Firms if left to their own devices, potentially has some merit. Though arguably, a business that wants to be sustainable in the 21st century, probably ought to have a business model that factors these into its thinking.
But there’s an even more important reason why we should avoid intrinsic motivators if we can. That is in situations when Compliance has a qualitative aspect to it.
Quality of Compliance
In his book The Law of Good People, Professor Yuval Feldman highlights the importance of considering the concept of “quality” of compliance. We tend to think of it in binary terms; like a speed limit where you either are or are not driving within it. However, in many cases, particularly in fields like conduct, it is much harder to codify exactly what we want people to do.
By way of example, he cites whistleblowing as an activity where we implicitly require a level of engagement from the participant. You don’t want to incentivize everyone to whistleblow, because they’ll do so for the wrong reasons. Instead, you want to incentivize people who find themselves in situations where it is appropriate, to do so for the right reasons. Getting people appropriately motivated to deliver this outcome, is less likely to be achieved through the use of extrinsic motivation. For a whistleblowing programme to be effective, it needs the target audience to be intrinsically motivated.
At least with whistleblowing, you have the opportunity to review the quality of what people have reported. Admittedly, you won’t know what hasn’t been reported, but at least you can see whether what has been reported is appropriate. There are lots of other activities where there is no easy way to assess the quality of Compliance.
Attestations, Surveys and Activity Tracking
A commonly used tool for ensuring compliance with a particular regulation is to ask people to attest that they have complied with it. Whilst this technique does try to make use of the intrinsic motivator of focussing people’s minds on their personal responsibility, it also requires a degree of engagement on the part of the person being asked.
Implicitly, I know that if I’m asked to attest to something, that the main reason the attestation is likely to exist, is that there isn’t an easy way for the person asking for it, to check whether I’ve done what I’m being asked. Because if there was, then they’d use that instead. In many cases, compliance can be verified through spot checks, so there is a form of deterrent. But for the regime to be truly effective, it needs people to feel motivated by more than the risk of being caught by a review.
Surveys are another example where intrinsic motivation is needed. Force me to fill in a survey against my will and the quality of the data I’m likely to give you will be very low. It never ceases to amaze me how organizations obsess over getting as high a response rate as possible. I would argue that if 30% of your organization don’t want to fill in a survey, then that is high-quality data, that tells you something. You might have to find out why, but the message is clear. By pursuing that 30% and making them fill in the survey, what you’re effectively doing is taking high quality data (“I don’t want to fill this survey in”) and converting it into potentially low-quality data (“I’m filling this in under duress”) and then co-mingling that low-quality data with the high-quality data that comes from willing survey participants. Where else would we strive to do that?
The problem here is that you have no way of knowing whether people diligently filled in your survey if they reacted badly to being forced to do it, or whether they did the bare minimum to get it done and just ticked the default options. When it comes to surveys, quality of Compliance really matters.
Replace the term survey with “timesheet” or “activity tracker” and you can see a similar problem. Particularly in jurisdictions where employers are not legally able to look at data on any one individual. Feldman makes the good point that we often seek 100% Compliance for activities where it isn’t really necessary. Or indeed desirable. I might need it for an attestation, but you could argue that having 70% of a population do a survey might be more than enough to allow me to extrapolate some meaningful conclusions from the data.
For these reasons, I think we need to give careful thought to the times when we deploy RR. It is all too easy to make it the very first thing we reference in requests, instructions and when explaining the rationale for internal rules. What I’m suggesting is that we try, whenever possible, not to default to making that the headline rationale for requiring people to do something. It may be highly appropriate to use RR in situations when intrinsic motivation won’t work; for those times when genuinely the only reason we’re doing something is because a regulator wants us to. I’m therefore not suggesting we don’t use it; especially as it is sometimes the regulators themselves that require us to do precisely that. Perhaps something for them to also think about…
But using RR often comes at a price that I suspect we don’t always fully contemplate. That price is that we transmit that we’re only doing it because we have to and that we wouldn’t if we didn’t have to.
That matters, because we all know that the effort we put into things we’re forced into doing, is much less than the effort that we put into things we want to do. By normalising its use, we blunt its effectiveness and potentially detrimentally impact the quality of compliance.
Overuse of RR can also give the impression of laziness; it is far easier to cite a regulation than to try to find intrinsic reasons why people might be motivated to do something. This fact won’t be lost on the target audience. Put effort in to motivate them and they’re more likely to respond positively.
I began by highlighting that small changes can make a huge difference. So when I suggest that we should think about our deployment of RR, what I have in mind isn’t the entire removal of all discretionary references to regulators or regulations. Rather that we think about when we reference it and that we look to change the tone of how we communicate requirements. For example, if the intrinsic motivators inherent in a requirement are sufficient on their own, perhaps we can relegate the reference to the underlying regulation to a footnote rather than make it the headline?
We all know that good line managers need to own messages, even when they might disagree with or have had no influence in determining what they’re being required to say. The same thing could arguably be said to apply to regulation. If we implicitly “blame” the regulator and don’t “own” the requirement, then perhaps we shouldn’t be surprised if our people react accordingly.
The views expressed in this article are the personal views of the author and are not made in an official capacity.
Welcome to the third part of my blog series on Friction. In Part I, I looked at what Friction is, highlighting that it can be both “good” and “bad”. In Part II covered examples of what Good Friction can achieve. This time, I want to explore what we can do about Friction that is undesirable yet unavoidable.
Key to the methods I will explore is this definition of the term that I featured in Part I:
Under this definition, unavoidable Friction occurs when the user’s perception (“the way things should be”) is at odds with reality (“the way things are”). Changing reality is often hard. However, changing perception is something that Behavioural Science (BeSci) is very good at. In this blog, I’ll look at some BeSci techniques that we can deploy to make this happen. Beginning with the simple idea that we don’t like being told what to do.
One way to make people more positively disposed to a particular situation is to increase theirperceived level of agency or control. In her book The Influential Mind, neuroscientist Dr Tali Sharot explains that our brains have a natural desire to know what is going on around us and to exercise control over that:
Our instinct when trying to influence others’ actions is to give orders. This approach often fails, because when people feel their independence has been limited, they get anxious and demotivated and are likely to retaliate. In contrast, expanding people’s sense of agency makes them happier, healthier, more productive, and more compliant.
For example, giving people an opportunity to advise how their taxes should be allocated increased the likelihood that they would pay them in full. To produce impact, we often need to overcome our instinct and instead offer a choice.
As the cartoon suggests, the experiment she refers to took place in America. Note how she uses the word “advise”; the taxpayers weren’t given actual control over where their taxes would be spent. However, answering a question that suggested they were being listened to, gave them a sense of control. Readers with children can test this by instructing them to wear a coat. Even if they intend to wear one, the mere fact they have been told to do so by an adult can often ensure they no longer want to. A more effective method can be to give them a sense that they have an element of control; don’t tell them to wear a coat, just ask them which coat they would like to wear!
We’ve all been in situations where we’ve felt powerless precisely because we didn’t know, or felt we didn’t know, what was going on. There’s a reason small children (and adults) often ask “are we there yet?” when they’re on a long car journey. The same principle applies when we start reading a document.
You may have noticed that in common with many other blogs, this one includes an Estimated Reading Time (ERT) metric at the start. The reason I’ve included this is that telling readers how long something is likely to take them to read, gives them a sense of control and an appreciation of the level of time they will need to commit to the task. It also negates potential loss aversion associated with starting something that they won’t have time to finish.
In tests I’ve done with ERT, what’s remarkable is that a bigger number (eg. 15 minutes) doesn’t put off anywhere near the number of readers you might expect it to. No-one reads long articles nowadays, right? Wrong. Obviously some people are deterred, but for the vast majority, telling them how long the article will take them to read has precisely the opposite effect. They might not read it straight away, but because they know how long it takes, they’ll come back to it when they have the time available.
To see how powerful it can be, visit howlongtoreadthis.com, a website that calculates (surprise, surprise) a personalized version of how long it will take you to read a particular book. It does this by allowing users to time how long it takes them to read an actual page of the book in question. Here’s the calculation it did for me with Tali Sharot’s book:
If I know how long I’m going to have to spend doing something, then I can mentally prepare for it. Rory Sutherland cites an example of this in one of his TED talks:
The single best thing the London Underground did in terms of improving passenger satisfaction per pound spent wasn’t faster, more frequent, later running trains, it was putting dot matrix display boards on the platform to tell you how long you were going to have to wait for your next train.
If we know a train is coming in 10 minutes, then we’ll happily wait. Make us wait with no certainty that a train is coming and we won’t feel anywhere near as comfortable. Though, there are limits to how far this dynamic works. I didn’t feel much satisfaction a few years ago when I arrived on a platform at Victoria station and saw this:
Given I’d already committed to getting the train and I know these signs are generally reliable, I thought I’d wait 3 minutes and see if 53 wasn’t 3 in disguise. Fortunately, it was, illustrating quite how powerful these boards actually are; I’m so used to them being right, that I’ll even place a favourable interpretation on the information they give me, even if it’s patently unlikely to be true. Alternatively, it may well be that my knowledge of how long it takes to exit Victoria station told me that investing 3 minutes in finding out, was a worthwhile investment.
Another way of making unavoidable Friction feel less onerous is to break it up so that the user doesn’t perceive the full impact in one go. Anyone who has tried to lose weight will know that crash diets don’t generally work. What does work is to break down big tasks into lots of manageable smaller ones; whether that’s getting into running by doing a “couch to 5k” program that gradually introduces the discipline of running or de-cluttering your home by following Netflix star Marie Kondo’s step-by-step methods.
Here’s how Facebook use chunking when you first sign up for their service. It is critical for them to ensure that new users quickly connect with existing users; otherwise, there won’t be a network for them to interact with. So to make this easy, they chunk the process of profile building:
It would also be entirely feasible for Facebook to put all of the steps on one page. Instead, they chunk the process to make it feel much less onerous.
Tech designers also use chunking when they deploy something called progressive disclosure. You’ll recognise it from menus on phones or computer screens. At each stage, you’re given just enough information to help you navigate something far more complex. Like this example from Apple’s mobile operating system:
turning on Wi-Fi on an iOS device is simple. Firstly the Settings screen focuses the customers on finding the right feature. The word Wi-Fi becomes the minimum amount of data needed. Even on the Wi-Fi screen available networks aren’t displayed until Wi-Fi is switched on. Why show customers available networks if their Wi-Fi isn’t even switched on?
The journey moves from an abstract location (Settings) to somewhere specific (Wi-Fi). It requires a few extra taps to get to the feature, but it reduces the amount of thinking needed in each step.
Progressive Disclosure can also be used to ensure that users only have to make more complex choices if they want to. For example, if we’re going to print a document, we can just hit the Print icon and accept the standard settings for things like colour, balance, and page layout. Or we can avail ourselves of a broader range of options if, and only if, we really want to. As a result, most users can proceed with relative ease, while those who want the additional optionality can easily find it.
If a task can’t be split up, then we can give the user a sense of progression as they work their way through something. It’s why Progress Bars like this one are often seen on websites and apps:
It’s particularly powerful where the task is something the user is doing for the first time or doesn’t do that frequently. A lack of familiarity will naturally increase anxiety on the part of the user. Telling them where they are in a process helps deal with that.
Another technique we can deploy with unavoidable Friction is to try to shift it to another point in the process where the user might have a different perception of it. The basic principle here is that Friction that is present in one part of a process might feel entirely different if placed in another. To see this in action, I want to visit the Golden Arches.
Defer or front load friction
In recent years McDonald’s has been introducing digital kiosks like these to its restaurants to allow customers to place their order via a touchscreen:
There are many advantages to this from a customer perspective. You can discretely order large quantities of food(!), you are given options to customise your meal in a way that you are unlikely to get when ordering from a person and it’s a quicker process. But it also helps McDonald’s to manage Friction.
Firstly it breaks up the lines that would usually form in front of a counter. As a result, it is difficult for customers to see how many other people are waiting in front of them, thereby removing a potential source of Friction at times when the line might appear to be long.
Secondly, the kiosks remove the anxiety that customers often feel when they are required to pick a line to stand in. We’re all familiar with being forced to choose a line and then watching to assess whether or not we’ve made the right decision. The kiosk eliminates the long lines at the counter and guarantees a much shorter average wait time.
Thirdly, at times when it is busy, the kiosks help remove the pressure that people often feel when there is a long line behind them, and they need to make what feels like a quick decision as to what to order. Even at the busiest times, there is unlikely to be a lengthy line at each kiosk. Hence people feel more relaxed and are able to fully assess the choices available to them.
Finally, it locks in the customer’s purchasing decision in very quickly; they are committed to making the purchase very soon after entering the restaurant and the Friction involved in As with the London Underground example, people are happy to wait for something, if they know that something is happening.
Front-loading friction is also a technique commonly used by subscription services which offer a free trial. However, to activate the trial, users are required to give their credit card details which then allows the service provider to start the paying subscription without having to pester the user who might then choose to walk away. This is so prevalent that Mastercard recently announced it would be banning the practice for certain transactions.
Of course, the risk with using kiosks or front-loading a requirement to enter credit card details is that it might put off potential customers. Either those who don’t like the idea of entering payment details in the context of something that is supposed to be free, or those who find the idea of placing an order via a kiosk to be intimidating or unacceptable. Which is where the next form of Friction reduction comes in.
Familiarity doesn’t breed contempt
A common form of Friction comes from the user’s perception of a particular process or product. Especially when that process or product is new to them.We can see a good example of this where elderly people are scared of new technology, perhaps insisting that they don’t “need” to understand it when in reality, they’re intimidated by it.
Designers have cottoned on to this and factored it into their thinking.What results is something called a Skeuomorph, which Don Norman explains in his highly recommended book The Design of Everyday Things :
“Skeuomorphic is the technical term for incorporating old, familiar ideas into new technologies, even though they no longer play a functional role. Skeuomorphic designs are often comfortable for traditionalists, and indeed the history of technology shows that new technologies and materials often slavishly imitate the old for no apparent reason except that is what people know how to do.
An excellent example of this, are the icons we see on computer screens, smartphones and even Apple watches:
On the black Watch, we can see what Apple calls the “digital crown” (the round red button on the side). It’s a design they’ve borrowed from analogue watches (where it serves the purpose of winding up or setting the time).
On the rose gold Watch, the icons used to give us the option of taking or rejecting Kathy Chen’s call are images of a traditional landline phone.
Given this is a brand new digital product, Apple could have chosen entirely new designs for those features. But they opted not to because one of the benefits of skeuomorphic design is that it gives users a sense of familiarity which means they feel more comfortable using the product. What might seem like an unnecessary appropriation of retro design, actually does something rather smart that’s highly relevant to the topic we’re looking at; it reduces Cognitive Friction on the part of the user. Changing to a new device or technology requires effort. By making something resemble something we’re familiar with, it significantly reduces the Friction associated with the transition.
In a blog on their website, 99Designs highlights a skeuomorph from Ancient Greece:
Notice the repetitive cubes which ornament the seams of this Greek structure. These cubes (known as dentils) were placed there to create the illusion of wooden rafters that were used to support the roof in old buildings.
Because buildings in Greece were made out of wood before marble, we can speculate that architects may have been trying to contain or emulate a shape that was familiar. Imitating wood in marble structures may have helped invite people to use a new technology.
This makes perfect sense. After all, if you’re not used to seeing a marble structure, then the one thing you’ll probably be most concerned about is whether the roof is secure.
As Don Norman points out, the inclusion of skeuomorphs can have a downside in that it sometimes serves to simply perpetuate existing friction. Take the humble QWERTY keyboard. The reason the keys are in this order has nothing to do with it being the most efficient way to enter data, yet we persist with it because it would take a brave manufacturer to take the step of designing something with no backward compatibility from a human perspective. Even Apple hasn’t dared to do so…yet!
The next method I want to cover uses a straightforward premise; if we can’t remove or reduce Friction, then let’s hide it.
The technique of disguising Friction is known as masking. It’s been around for a long time; restaurants that are incredibly busy and not able to deliver food as quickly as customers might expect will provide snacks or drinks “on the house” to keep people occupied while they wait. Or, in the case of Topa, a restaurant in San Sebastian in Spain, they serve an Ikea style guacamole which somehow manages to make the idea of “prepare it yourself’ seem attractive and worth paying regular restaurant prices for. I know, because I did!
It’s widely deployed in the digital world as well. Websites use graphics like this:
This isn’t just a distraction, it gives the impression that something is going on behind the scenes. Masking can also work by changing the form Friction takes. Here’s how one media company is doing it.
UK radio broadcaster Chris Evans has just moved from BBC Radio 2 to Virgin Radio which, unlike the commercial-free BBC, is paid for by advertisements. To attract Evan’s old listeners to his new station, Viring has struck a deal with Pay TV provider Sky to provide sponsorship which would mean that the show didn’t need to have ad breaks.
“The genesis of the deal [with Sky] is this isn’t vastly different from what Chris was doing on his Radio 2 show.
“When you listened to his [Radio 2] programme, it didn’t have traditional 30-second commercial spots, but there were many promotions for BBC content.”
Taunton pointed out how the BBC has more than 50% share of all UK radio listening and although it carries no ads, it does use its own airtime to carry frequent BBC promos “to extend the brand of their products and the content that they produce”.
He stressed that neither Virgin Radio nor Sky wanted the promotional content for Sky to be “onerous” for listeners.
“Many guests [who are planned for his new show] aren’t involved in Sky in any shape or form,” Taunton said.
Having no ad breaks should help to persuade some of Evans’ nine million Radio 2 listeners to move to Virgin, according to Taunton.
“The ad breaks may have been a barrier to them coming to us,” he explained.
In other words, the ad breaks were a form of Friction. By replacing the advertising with sponsorship, Virgin have effectively masked it.
The other thing Taunton does in the interview is to seek to position the “promotional content” Evans will need to deliver for Sky as being on a par with that which he used to do for the BBC. This is a technique called Re-Framing and helpfully, is the next method I want to look at.
Re-framing works by presenting information differently, to highlight alternative aspects of the situation or decision. By literally changing the user’s frame of reference, their perspective on a particular matter can be altered. This letter to The Times newspaper illustrates it beautifully:
Risks can be re-framed to give a completely different perspective: saying that something risks losing 10 out of 100 lives is likely to be interpreted differently than something that offers the opportunity to save 90 out of 100 lives. Even though the underlying facts remain the same. We feel differently about meat that is 95% lean and meat that is 5% fat, although they are exactly the same thing. Offering someone a £10 reward for doing the right thing or a £10 penalty for doing the wrong thing, feel different even though the underlying economics are the same.
Here’s another interesting example from Rory Sutherland about how re-framing was used on him by an airline:
I was on a plane taxiing to the airport recently when the pilot said something I’d never heard before. “I’ve got some bad news and some good news,” he said. “The bad news is that we haven’t been able to get an air bridge, but the good news is that the bus will take you straight to passport control, so you won’t have far to walk.”
It suddenly occurred to me that this previously unspoken upside of bus transfer was always true; sadly, no-one had told us before. We churlish passengers just assumed that we were supposed to resent the bus. Now, as I had two heavy bags, I suddenly felt grateful for the bus transfer. The pilot was a genius.
Re-framing can also be used to change the user’s perception of whose fault the Friction is. This can be seen in a clever (devious?) trick deployed by Facebook, which also demonstrates the lengths tech companies will go to, to influence us. The images below show two different designs for icons which the iPhone version of the Facebook App would display if it were having difficulty loading:
As tech blogger Rusty Mitchell explains in this blog, what Facebook discovered was that:
when their users were presented with a custom loading animation in the Facebook iOS app (left) they blamed the app for the delay. But when users were shown the iOS system spinner (right), they were more likely to blame the system itself.
By replicating the icon that Apple uses to signal a delay, Facebook is trying to give the impression that it’s not their fault, but rather the fault of Apple. It may be a 21st-century approach, but the technique it uses isn’t. Blaming someone else when something goes wrong is one of the oldest tricks in the book.
In the next blog in this series, I’ll look at how we can apply what we’ve learned so far, in the cause of managing Human Risk.
In Part I of this series, I explored the concept of Cognitive Friction and highlighted the difference between “good” Friction that serves a useful purpose and “bad” Friction that does not. I noted that, all too often
Friction is deployed unknowingly, unthinkingly or without the designer fully understanding the nuances of the impact it will have on the target population.
In this, Part II of the series, I want to tackle that challenge. Firstly, by equipping my readers with an understanding of what “good “uses of Friction are so that they can assess whether the ways in which they are currently deploying it are appropriate and effective. Secondly, to help them identify situations that are relatively frictionless, where perhaps the introduction of Friction might serve a useful purpose. Finally, I hope it will also reveal where they are unknowingly deploying Friction and could review its use.
As with most behavioural interventions, the determination of whether a particular use of Friction is “good”, or indeed “fair”, is a matter of perception. Context also matters; the use of a specific form of Friction may be entirely acceptable in one situation, but unacceptable in another.
In this blog, I will cover three broad categories of Friction:
Preventative designed to stop the target audience (“users”) from doing something undesirable;
Qualitative designed to improve the quality of the user’s decision-making; and
Engaging designed to improve the user’s engagement.
These are not “neat” categories; some uses of Friction will focus specifically on one of these objectives, others will deliver two or even three. While I am attracted to the concept that Friction, like Smartphone Apps, should focus on doing one thing well, I also think there is a strong argument that meeting more than one is also a good thing. After all, if we are going to slow something down or make it harder, then it is easier to justify doing that when we’re meeting several objectives rather than just one.
I should add that the categorisations I have used for Friction intentionally focus on the desired outcome, rather than the mechanics used to get there. Readers familiar with Daniel Kahneman’s Thinking Fast & Slow, might want to think about the interplay of the various examples with System 1 and System 2 thinking. I won’t explicitly cover it here, because I want to look at it later in this series.
The examples I give will lean heavily, but not focus exclusively, on the digital environment (“Digital”). Not because the techniques aren’t relevant in the physical world (they are!) but rather because Digital makes it far easier to design and implement Friction. It also allows for a degree of flexibility and personalisation that the physical world renders difficult, impossible or prohibitively expensive. That said, many examples of Digital Friction lever the same thinking as things previously deployed in the physical world. To prove that point, we’ll begin our review of the different kinds of “good” Friction with a modern-day version of a form of it that we can trace back to the 7th Century BC.
1. Preventative Friction
As the name implies, Preventative Friction is designed to prevent an undesirable outcome.
1.1 Prevent Unauthorised Access.
The idea of barring certain people from having access to a physical location is not new. Hence the invention of the lock and the key; the earliest known versions of which were traced back to Nineveh in Ancient Assyria.
Although this function is increasingly being performed by keypads, fobs and swipe cards, the principle remains the same. In Digital, we use logins, passwords and biometric security devices to restrict access to legitimate users. We’re even using Friction to keep out machines in the form of bots, through the use of CAPTCHA boxes that require us to prove that we’re actually human:
You’ll definitely have come across CAPTCHA, but do you know what it stands for? The answer is Completely Automated Public Turing Test To Tell Computers and Humans Apart. So now you know. Sometimes they use pictures rather than words. To understand the fascinating reason why I recommend this article.
1.2. Prevent Errors
Our second form of Friction will also be well known to you. Try to delete a file, and you’re almost bound to come across a message like this:
This form of Friction is designed to prevent us from making mistakes. It is so easy to implement that system designers now routinely use it to guide us through decisions where the worst case outcome is that we are inconvenienced or confused. After all, a deleted file can usually be recovered if the deletion was in error.
Preventative Friction is also deployed in more critical situations where the consequences of the decision are irrevocable, and/or where there is a chance that the user might not fully comprehend the magnitude of the impact of their actions. Like this:
To achieve their objective, the two previous examples rely on the user being able and willing to reject a particular outcome. But even when those presumptions might not apply, preventative Friction can still play a useful role.
Here’s a compelling case study involving “over-the-counter” (OTC) drugs; those that are available for purchase without a medical prescription. Because they are easier to purchase than prescription drugs, there is a higher risk that people using them will overdose; either accidentally or on purpose.
To reduce this risk, the UK imposed packaging requirements on manufacturers. As this NY Times article explains:
In September 1998, Britain changed the packaging for paracetamol, the active ingredient in Tylenol, to require blister packs for packages of 16 pills when sold over the counter in places like convenience stores, and for packages of 32 pills in pharmacies. The result: a study by Oxford University researchers showed that over the subsequent 11 or so years, suicide deaths from Tylenol overdoses declined by 43 percent, and a similar decline was found in accidental deaths from medication poisonings. In addition, there was a 61 percent reduction in liver transplants attributed to Tylenol toxicities
This is a really smart intervention. On the one hand, the packaging serves to deter people from overdosing, either deliberately or accidentally, in a way that selling it in a bottle would not. But the Friction it creates also serves a useful purpose for the average user; the blister pack gives a clear visual indication of how many pills the individual has taken, making it easier for them to medicate in the right dosage. An excellent example of Friction serving more than one purpose.
1.3 Improve Data Quality
Friction can also be used for data quality assurance. Fill a form in on a website, and you’re likely to find the data you enter being subjected to Form Validation checks, which ensure the accuracy of the information that is entered. For example, to prevent a user from registering with an email address that has already been used, or to ensure the address is in the right format. Like this:
In this example, Form Validation operates in two distinct ways. Firstly, it introduces Friction on a reactive basis, when it detects an error in what a user has typed. Secondly, it does so on a pro-active basis by requiring the user to re-enter their chosen password twice. The latter is necessary because the system has no way of knowing whether the password the user has typed in is what they intended; hence it requires it to be entered a second time.
Typo prevention isn’t the only use-case. Enter an event on a date that has already passed and many Calendar programs will ask you to confirm that you really did mean to create an entry in the past. The presumption on the part of the designer, being that most people won’t want to do this; unless, of course, the user is Stephen Hawking, attempting to discover whether time-travel is possible.
1.4 Deterrent Friction
To experience the next type of Friction, I recommend trying to get into a nightclub without being on the guest list. You’re highly likely to find yourself standing in a line for an arbitrary amount of time before you’re subjected to assessment by the door staff who will determine whether or not they’re happy to let you in, based on a set of criteria that appear to be modelled on the whims of Roman Emperors.
Arbitrary or not, it’s an excellent example of Friction which is mostly there to deter or prevent undesirable users. In situations where something is offered, either by design or unavoidably, to a larger population than is the intended target, Friction permits screening to occur. Nightclubs need to publicise their existence widely to attract people who will want to go, but they don’t want everyone who knows about them to come in. Of course, it isn’t the only reason they make people wait in line; we’ll come on to those later on.
The use of Friction as a deterrent is explored by Cass Sunstein in his research on “sludges” in the context of benefit payments:
If the process of getting benefits is too easy, people who don’t actually need the benefits may be incentivised to apply for them as well. As a result, those who need them most may not get the benefits because the money has already been given to someone else.Adding in a bit of sludge, like annoying paperwork, could stop those who don’t actually need benefits from trying to get them.
But does this count as sludge? While this practice doesn’t look after the self-interest of every single individual, it does look after the self-interest of certain individuals: those who are most in need.
The obvious counter-argument to this form of Friction is that it sounds good in principle, but there are likely to be unintended consequences. If you make claiming benefits too hard, you will deter those that don’t need them, but you’ll also put obstacles in the path of genuinely deserving people who might be least able to afford the time and cognitive load required to navigate the sludge. However, outside the context of social security, there are other valid reasons for deploying this kind of Friction.
Take Snapchat. For reasons I’ll come on to, it is highly likely that many of my readers might not know what it is. Those that do can feel free to skip on to below the Snapchat logo. For the uninitiated, Snapchat is a multimedia messaging app that allows users to send “Snaps” (pictures and short videos) which are automatically deleted after a pre-set amount of time; immediately once they have been viewed by all participants or after 24hours if the sender chooses this option.
The reason I suspect that some readers won’t be familiar with Snapchat is that was intentionally designed to target younger users, and implicitly exclude older ones. Both in the user proposition, but also in the execution of the idea. Most obviously in the UX (User Experience) which can be incredibly frustrating for anyone who is, to make a sweeping generalisation, aged 35 and above. Snapchat’s CEO, Evan Spiegel, has claimed that this is on purpose, insisting at a conference that:
This is by design. We have made it very hard for parents to embarrass their children.
In other words, they can’t stop parents from downloading it, but they want to deter them from using the service. Don’t believe me? If you’ve not tried it, give it a go. While some of you will find it easy, it’s likely to put many of you off. Admittedly, as this article highlights, SnapChat has recently made some changes designed to address this issue, but the fundamental Frictions that were there in the inception of the App remain and are very powerful.
Community websites face the same problem. They want to be accessible to everyone on the internet, to reach their target audience, but they want to control who participates in their community. Product Hunt, a tech review website, makes aspiring contributors jump through a number of hoops. They explain their reasons on the right:
By effectively increasing the barrier to entry through Friction, they are able to weed out users who don’t show sufficient commitment to the cause. Contrast that approach with frictionless signups to social networks like Twitter where the upside of no user screening is that everyone can join and share their wisdom. The downside is that everyone can join. Including ill-informed Dunning-Krugerites who can spout nonsense to a global audience.
2. Quality inducing Friction
2.1 Improve the Quality of Decision-Making
Having filtered out undesirable users, let’s now look at how we can use Friction to help improve the quality of the decision-making of the users we do want. The best example of this is the “cooling off” periods which regulators require financial services firms to offer their customers for certain products.
Studies have shown that these can be very effective. A recent one entitled, “Cooling Off and Backing Out” examined customer rescission (i.e. the reasons why consumers rescinded) during cooling-off periods and identified that they tended to do so for very compelling reasons, including:
“a mismatch between product features and personal circumstances” – in other words, the product didn’t meet their needs;
“post-purchase concerns about product value” – the product was poor value for money;
“reassessment of financial capability“- they couldn’t actually afford it;
“reflections on sales presentations” – they realised they’d been fooled by a slick sales pitch; and
“cautionary influences of reference groups” – they consulted with friends or family who persuaded them it wasn’t a good idea.
What this highlights is that if you give people more time to think about something, they’re very likely to make a better decision. Or at the very least, avoid making a really poor one. Because it isn’t possible to give them thinking time before they buy a product, regulators use Friction to create it artificially after the event.
Friction isn’t just useful for influencing decision-making around products that might inherently pose a challenge for consumers. It can also help when the rationale for making a purchase is more impulsive; particularly when the drivers for that impulse are strong emotions.
Research published in the US last year, highlighted that forcing people to wait before they can acquire a firearm, reduced gun homicides by 17 per cent with no significant increase in other types of homicides. In other words, not being able to buy a gun straightaway, doesn’t mean people just “displace” and commit murder by other means. The reason for this, is the power of emotions in our decision-making, as this Behavioural Science magazine article explains:
intense emotions like anger and sadness—“visceral factors,” in academic language—can cause people to take actions they later regret, such as resorting to gun violence.
Yet…these emotions are often transitory. Given sufficient time to cool off, the types of intense negative emotions that lead to violent tendencies can pass.
This suggests that inserting even a short delay in the gun-buying process has the potential to reduce gun violence, without restricting anyone’s right to own a gun.
The concept of a cooling off period is not new. The Preußische Beschwerdeordnung was a Prussian Army law that required anyone who wanted to file a complaint to their superiors to wait for a certain amount of time (the so-called “Prussian night”) after the complained-about incident occurred. A cynic might conclude that this was less about ensuring the quality of complaints was high and more about the introduction of Sludge to keep the number down. Perhaps it was both.
2.2 Improve Recall
Struggling to remember things you’ve read? Try Sans Forgetica, a downloadable font created by Melbourne-based RMIT University’s behavioural business lab and design school, that is scientifically designed to help students remember their study notes. It looks like this:
The font deploys something called “desirable difficulty”. What we know as Friction. As the designer explained to the Guardian newspaper:
When we want to learn something and remember it, it’s good to have a little bit of an obstruction added to that learning process because if something is too easy it doesn’t create a memory trace.
If it’s too difficult, it doesn’t leave a memory trace either. So you need to look for that sweet spot.
The idea of finding balance in creating Friction is also relevant to our next category.
challenges that are not too hot and not too cold, neither overly difficult nor overly simple.
He explains why these are important:
One source of frustration in the workplace is the frequent mismatch between what people must do and what people can do. When what they must do exceeds their capabilities, the result is anxiety. When what they must do falls short of their capabilities, the result is boredom. But when the match is just right, the results can be glorious. This is the essence of flow.
A need for balanced Friction is also a key component in Gamification; the application of techniques commonly found within game environments which are widely used to drive user engagement. It works because we’re naturally drawn towards playing games; whether on a computer screen, the page of a magazine, a board, or on a sports field.
Friction is a pre-requisite for games. Without challenges for the players there would be no reason to play, but make them too difficult, and players will give up. Getting this balance right is the essence of a good game. Take the board game Othello:
Part of the reason it’s been so successful, with reported sales of over 40 million units, is that beginners are attracted by the apparent simplicity, yet there are enough complexities in the game to retain the interest of advanced players. All nicely encapsulated by the game’s tagline: “A minute to learn…a lifetime to master!”.
Placing value on things we spend time on, is a key driver behind our next use-case for Friction: driving user engagement. We’ll begin with a store whose product offering is about as Friction-filled as it gets.
3.2 Ikea Effect
If you’ve ever had the pleasure of going shopping in Ikea, you’ll know what I mean. You join 100s of other shoppers in entering a lengthy process that involves shuffling along a path littered with attractively priced temptations. It’s no wonder people reward themselves with Swedish meatballs in the cafe at the end of it all!
But the Friction doesn’t end there. Because when we get our flat pack furniture home, we have to begin the process of assembly. Ikea tells us that selling furniture this way allows them to sell it more cheaply; they can transport more cost-effectively, and the labour effort to build the furniture is transferred to the customer. In a, perhaps surprising discovery, it turns out that there’s an additional benefit. Meet the Ikea Effect:
Researchers discovered that because we place disproportionately greater value on things we’ve expended effort in creating ourselves, the Friction that the need to assemble creates actually serves to make us more positively disposed towards our furniture. A double win for Ikea and a prime illustration of Friction counter-intuitively building user engagement.
3.3 The Locksmith’s Paradox
It isn’t just our own time that we think of in these terms. We apply similar principles when others do things on our behalf, and we tend to value other people’s work by the effort we perceive that they’ve put into it. Usually, we’ll measure this in time, but it might also be based on arbitrary metrics like how much they sweat if physical labour is involved. As a result, if someone makes something look easy, then we won’t value it as much as something that seems hard.
Rather than judging it by the utility we gain from the labour (i.e. the output), we judge it by the perceived level of input. What this means is that we can find ourselves inadvertently rewarding incompetence more highly than competence. This is known as The Locksmith’s Paradox, for reasons that Dan Ariely explains in this video.
Many companies exploit this to make their product seem more valuable. Starbucks requires its baristas to steam each customer’s milk individually; it takes longer but feels more personal, and so we value it more. Travel comparison site Kayak deliberately creates a pause before it delivers results to its users. As this HBR article explains, we actually appreciate something more, if it takes longer and they’re told why.
Conversely, my local Thai restaurant tells callers placing takeaway orders that their food will be ready in 10 minutes. Rather than being grateful for being fed so quickly, this makes me nervous; I expect restaurant food to be “cooked” not “heated up”. As a result, they’ve lost my business. What they should probably have done is create Friction by telling me it would take 30 minutes and then just delaying their preparation process for 20 minutes.
The Ikea Effect and Locksmith’s Paradox also illustrate another use case for Friction: creating a perception of exclusivity. One of the other reasons the nightclub I referred to earlier, wants to have a long line outside is to create the illusion of being a highly desirable exclusive venue. The queue of people signals that it is popular and that people are prepared to stand in line to get in, and the slow speed of entry and selection criteria gives a sense of exclusivity. All of which will make the experience feel much better for you if you’d just been able to stroll in.
Retailers use Friction to create exclusivity around ‘limited edition’ products that are hard to get hold of while airline frequent flyer schemes only offer Olympic medal coloured statuses to passengers who’ve spent long periods in the air with them. Both require commitment, which in turn strengthens the user’s perception of exclusivity.
Plato once said that “necessity is the mother of invention”. In doing so, he helpfully highlighted one of the more surprising benefits of Friction, which is that it can promote creativity.
solve problems; sidestep ‘problematic’ rules; bypass workflow blocks created by safety mechanisms; address poor workflow design and organisational and system issues; save time; backup software data applications; compensate for inadequate technology; patch software glitches; or offer solutions to a range of problems including shortcomings in staffing, equipment and supplies
Each of these types of workaround, whether “good” or “bad”, are driven by a desire to :
circumvent or temporarily ‘fix’ an evident or perceived workflow block
That evident or perceived workflow block is what we refer to as Friction.
We can also see how Friction encourages creativity in the kitchen. Take ready-meals, which are, in effect, an almost frictionless form of “cooking”. What they offer in convenience, is offset by the minimal scope for personalisation. In direct contrast, cooking from a recipe is a process filled with Friction, but which allows the chef latitude to experiment and tailor the dish to their own desires. In both cases, the amount of Friction in the process is proportionate to the amount of creativity the option permits.
Creativity can also be driven by appropriation; using something for a purpose for which it was not designed. The word is most often used in negative contexts like “cultural appropriation” and “misappropriation”, but that doesn’t mean that all appropriation is automatically wrong. A chair isn’t intended to be used as a ladder, but people often successfully use them in that way, when there is no ladder to hand. As with workarounds, appropriation is encouraged by the existence of Friction; whether the outcome is a good or bad thing is a matter of context and perception.
An example of appropriation is the use of mobile phones. One of the most common seams for a mobile phone is irregular network coverage and local variations in signal strength.
These seams are commonly accepted as reasons for not answering or dismissing a phone call, thus giving the user the opportunity to exploit knowledge about them. A user can adapt his or her behavior by pretending to have bad network coverage (for example in tunnels) or poor reception if he or she does not wish to talk to someone.
Clearly, the use of Friction to drive creativity is more applicable to some situations than others. We probably wouldn’t want people in charge of a nuclear reactor or air traffic control, to have the latitude to try new things “on the fly”. Much will also depend on the skillset and experience of the users; allowing a Michelin starred chef to experiment is a good thing, whereas McDonald’s needs to operate on a more controlled basis.
Over to you
So there we have my list of reasons why Friction can be a good thing. I stress “can” because I recognise that the appropriateness of a particular deployment of it, is context dependent. As with other forms of Behavioural Intervention, the designer’s perspective on what is appropriate might differ from how the user feels about it.
If you think I’ve missed a form of Friction, let me know.
In the next in this series, I’ll look at how we can deploy BeSci to help us when Friction is undesirable, yet unavoidable.
Ask any Behavioural Scientist how you can get people to do what you want them to, and you’re very likely to get the same answer. Here it is courtesy of Richard Thaler, the Nobel Prize Winning “father” of Nudging:
“The mantra I always give, is that you have to make it easy”
Given I’m a proponent of bringing Behavioural Science (BeSci) to Compliance, it might, therefore, seem odd for me to focus on precisely the opposite; making things harder. The answer, as is often the case with BeSci, might seem somewhat counter-intuitive.
Slowing things down or making them harder by introducing “Friction” can actually be a good thing. Using it as a restrictive tool to make something we don’t want people to do, less straightforward, is one obvious way. But it can be equally useful, in situations when the activity in question is something we do want them to do. By understanding the full potential of Friction and deploying it intelligently, Risk & Compliance professionals can arm themselves with an incredibly powerful risk management tool.
However, all too often within organisations, Friction is deployed unknowingly, unthinkingly or without the designer fully understanding the nuances of the impact it will have on the target population.
Increasingly, the proliferation of Friction is blamed on control functions. Whether or not they are actually responsible. Sometimes, it is the processes built or curated by these functions that are guilty of over-deployment of Friction. However, on other occasions, they, along with the bête noire that is regulators, are convenient scapegoats for inefficiencies caused by other parts of their organisation. By highlighting the issue of Friction, I want to help my profession make better use of it. That way we can avoid further tarnishing of our brand and deliver better outcomes, more cost-effectively.
I also want to help my Risk & Compliance peers be more aware of how Friction works in reality, rather than in theory. This will also allow them to identify poor uses of it by other parts of their organisation.
Because a mis-deployment of Friction can hugely increase both the Operational and Human Risk profiles of the organisation. Put the wrong kind of Friction in people’s path, and they’ll find ways around it that are not in the organisation’s interest. While the right kind of Friction can enhance risk management and inspire innovation.
In this first blog on Friction, I’ll explore how it arises and highlight examples ranging from “virtually frictionless”, to “good” and “bad” Friction. In later blogs, I’ll explore the impact Friction has on the target audience and then identify ways in which we can deploy it as a powerful risk management tool. To begin with, let’s look at what the word means.
What is Friction?
In the physical world, we define Friction as follows:
As the Friction I’ll be referring to is cognitive rather than physical, we need a slightly different definition. While the idea of “slowing a moving object” down is still relevant, cognitive friction isn’t as quantifiable as physical friction. We can measure the Friction on a banana skin, but the Friction inherent in a cognitive process is dependent on the perception and experience of the individual involved.
As a loose metaphor, think of it this way. If I’ve never done something before, then it’s likely I’ll encounter more Friction in the process, than someone who is an expert at it. You only have to watch television cookery or home improvement shows and then try to replicate what is made to look simple on screen, to understand this point.
For that reason, I prefer to think about Friction along slightly different lines to the physical definition above. For these purposes, what I mean by the word is closer to the way it’s described in a book called, appropriately enough, Friction.
(c) Friction: Passion Brands in the Age of Disruption by J. Rosenblum & J.Berg
That doesn’t mean we can’t bring any science into this. Part of what we’re dealing with here is explained by Hick’s Lawwhich states that the more choices you present people with, the longer it will take them to reach a decision. This helps explain why technology companies are often fixated on removing as much Friction as they can. In the words of Facebook’s Mark Zuckerberg:
Our goal is to make it so there’s as little friction as possible to having a social experience
Their key focus is on User eXperience (UX). That’s because poor UX results in Friction which deters users. For my more scientifically minded readers, here’s one UX designer’s take on Hick’s Law:
We’ll begin our exploration of Friction by looking at how one tech company removes as much of it as it possibly can.
Close to Frictionless
That company is:
Not only exemplary in reducing Friction, they’ve also been helpful enough to talk about the techniques they use, so we have some useful insight. As highlighted in this fascinating article, founder Jeff Bezos gave his team a specific vision for what he wanted:
“We need something to make the ordering system frictionless. We need to make it so the customer can order products with the least amount of effort. They should be able to click on one thing, and it’s done.”
What came out of this was something called “1-Click Checkout”. 19 pages of patent and hundreds of lines of code later and Amazon was able to deliver the feature that Bezos had asked for. Of course what went on behind the scenes was invisible to customers; all they knew was that if they clicked the button, they could buy things with just a single click.As anyone who has used Amazon can testify, this makes shopping dangerously easy. Providing, of course, you’ve previously entered your payment details and delivery address. In reality, then, they haven’t eliminated Friction entirely but have reduced it to the bare minimum necessary.Amazon’s other products serve a similar purpose.
The Amazon Echo might be sold as a voice-controlled smart speaker, but the real end game for the Alexa virtual assistant is to provide a voice interface for…you guessed it: more shopping. Voice is even more frictionless than a keyboard and mouse or smartphone screen.
One day, the Internet of Things will mean we’ll have washing machines that can order their own liquid supplies. Until then, Amazon is bridging the gap with has “Dash” buttons. These allow us to order things, from Amazon of course, “in situ”. After all, we’re most likely to remember we need more washing powder when we’re in front of the washing machine.
Amazon clearly takes Friction seriously; it takes time and effort to conceptualise and then implement interfaces of this kind. In an interview, Amazon Director Kintan Brahmbhatt explained the taxonomies (my word not his) that they use to categorise the different causes of Friction that they have identified:
What I like about their approach is that it is user-centric. Friction either exists to help the user; what Brahmbhatt calls “by design”. Or it doesn’t, in which case it is something that they seek to eliminate. Their approach is based on understanding how users think:
This is what we’re trained to do as human beings — take the easiest route. Reducing friction is all about creating a path of least resistance.
To help find it, Amazon has identified three factors that induce a perception of friction on the part of the user.
The first is anxiety, caused by having to make decisions and from a cognitive bias called Loss Aversion. We all understand the former; taking decisions requires effort. Loss Aversion is the idea that we intuitively feel losses disproportionately more than gains, so if in making a choice we risk losing something, it weighs more heavily on us. Of course, most choices do precisely that: in a choice of A or B, we lose one of the options.
When Amazon first introduced digital music, consumers who had historically bought CDs and vinyl might reasonably resist the new format. After all, you’ve invested in your existing collection, and digital might not be as good as what you’re used to hearing. So to remove anxiety on the part of customers, Amazon launched a feature called AutoRip where they automatically gave people digital versions of any music they bought in physical format.
What’s more, they did the same for all the music people had already bought on Amazon. This meant customers inherited a pre-existing library (at least for what they’d purchased on Amazon) and no longer had to choose between formats. Above all, they wouldn’t feel a sense of loss by missing out, and as a result, Amazon helped make the shift to digital as frictionless as possible for the customer.
I discovered recently that they do something equally clever with books. My local bookshop didn’t have something I wanted, so I ordered a physical book from Amazon. Because a Kindle version of that same book is available, Amazon also let me read the first few chapters for free straight away. A cunning way of eliminating the Friction of having to wait for the book to arrive, which also introduces buyers of physical books to the benefits of e-books. Of course, this costs them nothing, because all they’re doing is giving me the free sample that I could get for myself from their site. But it feels like they’ve made my life better and added value to the purchase I made.
The second factor is reducing the cognitive load on users. In other words: the amount of effort something requires. Amazon only asks you to make decisions if really necessary, and each decision is carefully framed to be as straightforward to understand as possible. Take a guess at how many products they have on sale. It’s probably a lot more than you think. This chart shows the size of the product range a year ago:
Under normal circumstances, offering people that many products could be somewhat overwhelming, thanks to something called The Paradox of Choice. We think we like optionality, but in reality, we don’t. This was wonderfully illustrated by some research that experimented with offering consumers a more or less extensive selection of jams to choose from. Surprisingly, selling a smaller range, meant people bought more. That’s because we find making choices with lots of options difficult and we’d prefer to walk away.
Amazon counteracts this with menus that are extremely easy to navigate:
The final factor that induces Friction is minimising the need for context switching. This is arguably a subset of reducing cognitive load. Put simply it means “letting people do everything in one place” without requiring them to go elsewhere. Storing the customer’s credit card details means they don’t need to go to their purse or wallet to retrieve it. All of Amazon’s services are available direct from their website. Order a Kindle book, and you can read it right there without needing to load an App or change device.
Compliance as Friction
Next time you’re on the Amazon website, think about how easy it is to find what you want and order it. Now imagine we could achieve similar aims in meeting our Compliance objectives. It sounds crazy and yes there are differences between what Amazon is trying to deliver and what the Compliance function in regulated industries is there to do. But that doesn’t mean we can’t learn from them and that we shouldn’t try to adopt some of their user-centric philosophy. Particularly in how they analyse Friction.
Notice how the criteria they outlined was from the perspective of the customer, not Amazon. What they look to address are things that make it harder for the customer and, critically, things that make the customer feel like things are hard. Customer perception might not match reality, but that’s irrelevant. It’s like justifying an offensive comment by saying “I didn’t mean to offend you” and assuming this automatically means something isn’t offensive to someone else. The intent is irrelevant when it comes to how people perceive things. When it comes to Friction, perception matters a lot.
I think we can learn a lot from Amazon because we’re both in the business of trying to influence human decision-making. Amazon wants to make it easy for people to buy things. We want to make it easy for people to be compliant. The processes we deploy to manage risk can cause similar psychological responses in our target audience. Yet we don’t often think about things like anxiety or cognitive overload when designing Compliance processes. This is a missed opportunity.Sometimes we’ll want to minimise Friction, just like they do. But on other occasions, we’ll want to actively deploy it to achieve our goal.
With that in mind, it helps if we understand what “Good” and “Bad” Friction look like. We’ll start with the Bad.
You’ll intuitively know what “Bad” Friction is. So I won’t spend as much time explaining it as I did with the Amazon case study. The most obvious example is what Cass Sunstein calls Sludges; so called because they’re the opposite of Nudges.
“The term should be taken to refer to a kind of friction, large or small, that people face when they want to go in one or another direction. People might want to cancel a subscription to a magazine in which they no longer have the slightest interest, but to do that, they might have to wade through a great deal of sludge”
Sadly Sludges are commonplace, and we’ve all been on the receiving end of them. For more on Sludge, I recommend this helpful summary by Wilte Zijlstra, an enlightened BeSci practitioning Dutch regulator.
Though I was pleased to see a recent announcement from Mastercard with the headline “Free Trials Without The Hassle”. In it, they stated that they will now prevent merchants from billing users at the end of a free trial, without getting their approval. Sadly and inexplicably, its only for physical purchases, but its a start.
The types of situation that Mastercard is, belatedly, looking to prevent are obviously intentional; the person who has designed the Sludge, purposefully wants to make it hard for the end user. However, its also possible to achieve suboptimal ends, with the best intention.
Take password security. For understandable reasons, websites require us to enter passwords with a certain level of complexity to make them less hackable.But you don’t have to go too far to find a website that takes this idea a little too far and imposes password requirements that are feverishly difficult to comply with.
Like this example from the Attorney General of Texas Child Support website. It’s worth reading them in detail to understand quite how ridiculous they are; it’s not even clear what are requirements and what are recommendations. What is clear, is that picking a password is going to be hard. And good luck if you forget it and need a new one!
The end result here is user frustration and, ironically, a higher likelihood of security being compromised as people write down their fiendishly hard to remember passwords. And that’s before we consider what impact the sludge might have on the process of claiming child support, which appears to be the purpose of the website. It’s almost as if they don’t want to pay any out!
As I said at the outset, “Bad” Friction is something we’re all familiar with. But that doesn’t mean that all Friction is bad. Let’s now take a look at an example of what I think is exemplary Friction.
It comes, perhaps surprisingly, from a tech company. Even more surprisingly, it’s from a company that hasn’t exactly always had a good reputation. Though as we’ll see, the Friction was introduced in response to a customer backlash, so when I give credit, it’s not necessarily for coming up with the idea. The execution, however, works well.
The company in question is Uber, and the Friction is introduced whenever “Surge Pricing” kicks in. Depending on your perspective, Surge Pricing is either a way of ensuring that there is always a supply of drivers available to meet customer demand (the Uber position) or a piece of usurious price gouging (the argument used by quite a few customers).
It works as follows: if the demand for cars exceeds supply, Uber puts prices up to try to recalibrate supply and demand. Or to increase their profit margins. Take your pick. Following complaints by customers, Uber introduced additional confirmation steps to ensure that users couldn’t plead ignorance of what multiple of the standard price they would be charged for their journey.
Order a car when surge pricing is in force and two things happen. Firstly you’re presented with the multiple of normal fare price you’ll be paying which you have to click to agree to. Then you have to re-type that multiple yourself.
As a result, riders can be in no doubt, before they get into the car. They might not like it, but they will be aware of it. It’s two small steps that slightly delay a generally friction-less process and in doing so discharge a moral responsibility. For that reason, I see this is “good” Friction.
Uber isn’t the only tech company that sees benefits in introducing more Friction. In an article entitled The Internet Needs More Friction, Justin Kosslyn argues that the obsession with frictionless services has resulted in some bad outcomes:
The internet is facing real challenges on many fronts. If we truly want to solve them, engineers, designers, and product architects could all benefit from the thoughtful application of friction. The philosophy of the Internet has assumed that friction is always part of the problem, but often friction can be central to the solution.
What’s remarkable about the article is that Kosslyn leads product management at Jigsaw, a unit within Alphabet, who are the parent company of Google. Echoing this, a recent New York Times article headlined “Is Tech Too Easy to Use?” asked a simple question:
Could some of our biggest technological challenges be solved by making things slightly less simple?
In the spirit of that question, in the rest of this series of blogs, I want to explore how we might use an improved understanding of Friction to manage Human Risk.
Until next time…
In my next blog, I’ll look at obvious and less obvious use cases for Friction and explore the impact these have on the target audience. In the meantime, keep an eye out for examples of Friction in your world and share them with me. I guarantee that once you start looking for them, you’ll see lots of it about.
Usually when there are newspaper headlines involving football that refer to cheating, then it is reasonable to assume that they’re referring to player activity on the pitch. However, this weekend in the UK we had an off-pitch incident involving Managers which the sports press somewhat predictably named “Spygate”.
Frank Lampard, the Manager of Derby County, accused Marcelo Bielsa, the Manager of rivals Leeds United, of having sent a spy to secretly watch a Derby training session ahead of a game between both clubs. A game that Derby went on to lose 2-0.
After the match, Lampard said that he felt that Bielsa had not acted in the spirit of the game. In response, Bielsa freely admitted that he had sent someone to spy and that he had been doing it for a number of years. Bielsa, who is Argentinian, started working in the UK in the middle of last year having previously worked in a number of other countries where, he claimed, it was a common ‘tactic’. In his post-match interview he said:
“I found out by calling him that he thought I didn’t respect the fair play rules. If we take into account this fact, Frank Lampard is right, Derby County are right and their fans are right. The conclusion that has been drawn is that I had a sporting advantage and that my behaviour was not right. I can explain my behaviour but I don’t justify it because I have to respect the norms that are applied in the country where I work.”
Note that word “norms”, we’ll come back to it later. Reinforcing what Bielsa said, Leeds United also put out a statement saying that they had subsequently reminded him of “integrity and honesty which are the foundations of the Club.”
Bielsa hasn’t yet been charged with anything by the Football Association (FA) and I suspect that it’s unlikely he has actually broken any rules. But it’s clear from the widespread condemnation he received and the Club’s response, that he has breached an unwritten code of conduct.
I’m fascinated by this from a Human Risk perspective. During my hiatus from blogging, I’ve been working on “Bringing Behavioural Science (BeSci) to Compliance”; deploying BeSci to deliver better outcomes from the two disciplines I cover: Compliance and Operational Risk. Both are largely focussed on influencing human decision-making; Compliance because organisations can’t be compliant of their own accord, its the people within them that determine that status. Meanwhile, the largest single factor, whether root cause or accelerant, behind Operational Risk is people.
The Bielsa case highlights something I’ve been thinking about a lot: how can we get people to do what we want them to? In particular, how to write rules and policies that are more effective at influencing human behaviour.
Your perspective or mine?
Rules are most commonly written from the perspective of the organisation writing them, rather than the perspective of the target audience. The implicit presumption being that because a particular outcome is required by the organisation; “if we write it, they will comply”. In predictable environments, this approach makes perfect sense. I want the ground and aircrews of the plane I’m about to fly on, to have completed standard pre-flight checklists. Regardless of whether or not they think it’s a good idea. Though obviously those flying with me have a huge incentive to do so.
However, in less predictable environments,this can lead to rules that are model answers to exam questions that codify a theoretical “black and white” world, rather than the “grey” real one in which people find themselves.
To achieve this, the rule-writers often err on the side of writing longer, rather than shorter rules. This makes logical sense. Having lengthy all-encompassing rules seems like a good way to mitigate risk. After all, if you cover everything, there’s no room for confusion. Ironically though, the more prescriptive the rules, the greater the potential risks.
In a fast-moving and more complex world, there will increasingly be situations that people find themselves in, which won’t have been in the direct contemplation of the rule-writers. In “rule-centric” environments, people are incentivised to behave like electricity seeking the path of least resistance and seek the “rule of least resistance”.
As a result, “good” people can end up doing the wrong thing having tried to do the right thing by following the rules, whilst “bad” people can use this dynamic for arbitrage.
Perception is everything
Even where the rules do contemplate a particular situation, what is often also ignored is the target audience’s pre-existing perception of the situation and the authority that is seeking to control their behaviour. If the target audience already has a view on how it would approach a situation then a rule that supports this is likely to gain more natural traction with them than a rule that goes against that. But equally a rule that codifies something the target audience would do of their own accord can also backfire, if there’s a sense that it is patronising or trying to force them to do something they would do naturally of their own accord. And if the target audience thinks the rule-makers have overstepped their authority, then there’s a likelihood of a backlash.
This doesn’t mean just writing rules the target audience like. What it does mean is giving careful thought to how they are likely to react and finding smart ways to codify rules that will maximise their propensity to comply. If we want rules to be effective; then they need to be as user-centric as possible.
I recognise that in global organisations, this can be challenging. Not least because Social Norms may differ according to culture. But just because it’s difficult, doesn’t mean we shouldn’t think about it. By employing people, these dynamics exist whether we want them to or not.
In the Knowledge Economy, there is a trend towards hiring people to do the things that machines can’t. These tasks involve cognitively advanced skills like judgement, nuance and intuition. If we want smart people that have been hired for those skills to perform at their best, then we need to craft rulebooks that give due consideration to them as “thinking” rather than “unthinking” users.
The best example of the implementation of “thinking compliance” in a user-centric framework that I’ve come across is the one deployed by Netflix. Their Freedom & Responsibility culture begins with the principle that there are only two kinds of non-negotiable rules: those that prevent irrevocable disaster; and those that cover moral, ethical and legal issues (for example bullying). Other rules can “shapeshift” according to circumstances. Hence their Expensing, Entertainment, Gifts & Travel policy is 5 words long: Act In Netflix’s Best Interests. Obviously, this leaves huge room for interpretation, but it’s not a rule that can be arbitraged or that any employee can deem unreasonable. Compliance becomes a matter of judgement and requires employees to justify their behaviour in absolute terms, rather than relative to a prescribed norm in the rule. It’s admittedly very bold and not something every company will be able to adopt, but it shows how rules can be crafted in a more user-centric way. For more on this, I recommend Powerful: Building a Culture of Freedom and Responsibility by Patty McCord, the former Netflix Chief Talent Officer.
The reason I suspect there’s no rule against what Bielsa did, is that the FA probably intuitively engaged in some Netflix style thinking. There’s no rule, because no-one ever thought it was necessary to have one. After all, if the Social Norm is well understood, then why would you need a rule? The answer might be that with an increasingly global market for players and managers, a domestic Social Norm might no longer be understood by everyone.
To understand whether a rule is needed and if it is, how it is best written, it is necessary to have a good appreciation of the perception and perspective of the target audience.
Assuming I’m right that there isn’t a rule against what he did and the FA decided it did want to write one, how would they do it? One thing’s for sure; it wouldn’t be easy. Don’t take my word for it. Frank Lampard revealed precisely that in his post-match interview:
“I don’t know what the rules are. I believe there’s not an absolute clear-cut rule about it but we can’t open the door to this thing happening every week. What kind of farce would that be, of everyone sending undercover people, drones, whatever, into training. It would be farcical. So something has to be done, I just don’t know what it is and it’s not my decision.”
Perhaps unsurprisingly, what I’ve been discovering is that it’s very easy to write rules. It’s a lot harder to write rules that are effective in delivering the intended outcome in all situations. To misquote a well-worn aphorism: I’m sorry my policy is so hard to comply with, but I didn’t have time to write one that made it easy.
Bringing Science to Compliance
Fortunately, I’ve also been discovering that my hunch (that BeSci can help us solve this and other Compliance challenges) which set me off on my quest, is being proven to be correct. In my research, I’ve come across some really innovative thinking. Here are just three examples:
The first comes from a practitioner friend of mine, Maarten Hoekstra who has created the wonderfully named Broccoli Model for Compliance.
This user-centric approach delivers Compliance objectives by helping people to do the right thing, rather than just telling them what to do. By focusing on Moments, real-life situations in which people find themselves, and factoring in Social Norms, the Broccoli Model works with the grain of human thinking rather than against it. To find out more and why Maarten gave it this unusual name, watch his presentation.
The second is from the field of Behavioural Law. In The Law Of Good People, a book I highly recommend, Professor Yuval Feldman explores the factors we need to consider about “the rule of law in a world populated by individuals with different levels of awareness of their own unethicality”.
Two things he covered that gave me particular pause for thought.
Firstly, there is a temptation to talk and think about Compliance as if all requirements are designed with the same intent. They’re not. Take Whistleblowing as an example; you want people to feel incentivised to whistleblow if, and only if, they come across situations that necessitate it. You don’t want everyone doing it all of the time. In Feldman’s words, this is a situation where “it only takes one to help”. Contrast that with other things which you need everyone to do all of the time, because “it only takes one to harm”. What we’re asking people to do in these two instances is very different, yet we tend to incentivise both behaviours in the same way. Not least in the language we use to write the rules.
Secondly, Feldman opened my eyes to the concept of “Quality” of Compliance which I’d never really thought about before. Some tasks are binary in nature; you either are or are not, compliant. But others, have a quality component. Whistleblowing is one. At least with whistleblowing, you can assess that quality after the event. For some things, you can’t. Many Firms ask people to track their activity; either for client billing or resource allocation purposes. For this exercise to have any value, people need to feel incentivised to take it seriously and provide accurate data. That isn’t always easy to do and the individuals tracking their activity will probably be aware of that. Whilst it is possible to do some form of Quality Assurance (QA) on the reported activity of individuals doing predictable tasks or working on specific clients or activities, it is much harder for those that don’t. Particularly in countries like Germany with strong data privacy laws. It’s the people with the least QAable data, whose input potentially offers the most interesting perspectives. After all, if we have no means of QAing it, then what they’re giving us is by default new insight. So for this and other activities where we need people to undertake tasks involving an element of quality, there is a need to ensure they’re positively engaged in it and not doing it under duress.
T11 is a framework created by the Dutch government that helps legislators consider potential reasons for non-compliance. By analysing the reasons why people might not want to do something, it can help legislators think about how they might craft better rules with a greater likelihood of people willingly complying with them.
I know some readers will see this thinking as overly complex and will prefer a simpler world where rules are simply written and obeyed. Experience tells us that this doesn’t work and that the billions that are spent on writing, maintaining and policing rules, isn’t necessarily money well spent. By making e it easier for people to do the right thing, we’ll get better outcomes and almost certainly save money. People don’t do things just because we tell them to or just because we employ them. And if we need quality of Compliance, then we risk not achieving it by thinking in those terms.
To rule or not to rule…
It will be interesting to see whether the FA actually has a rule that covers spying on other clubs. If it does then Frank Lampard doesn’t know about it. But then he doesn’t need to; he’s compliant because of a Social Norm. His behaviour is intrinsically motivated. That’s far more powerful than the extrinsic motivation of doing it because of a rule that tells you to.
If there isn’t a rule, then the FA should think hard about whether one is really necessary. Write a rule that suggests you think there isn’t a powerful Social Norm on the topic and you risk undermining the one that’s already there. Not only has the publicity surrounding this case demonstrated quite how powerful that Norm is, but it also theoretically means that no-one in English football can be unaware of the issue. Which is probably enough to impose the Social Norm amongst those that weren’t already abiding by it. At least in the short term. Except perhaps foreign managers who come in the future. Though I’d argue that there are probably better ways to get to them, than through the rulebook.
If there’s one thing I think the Bielsa case illustrates, it’s that if we want to get the right outcomes, then my mission to Bring Behavioural Science to Compliance is the right way forward.
If you’ve read any of my previous blogs, you’ll know that I’m a huge proponent of Behavioural Science (BeSci). Generally, and more particularly within my own areas of specialism.
Not just because it allows me to talk about Bringing Science To Compliance, but also because I think it’s a (cost) effective way of delivering good outcomes. Organisations can’t be compliant or non-compliant of their own accord; it’s the people working within them that determine that. It’s equally important for my other discipline of Operational Risk Control; people are the biggest single driver of risk. Traditional extrinsic motivators clearly don’t always work, so we need to look at also using far more powerful intrinsic ones.
Of course, BeSci isn’t just of use to risk and compliance functions; it has applications across all parts of organisations. But I think we have a key role to play in their use within organisations.
BeSci: Bad Sci?
One of the criticisms often levelled at BeSci is that it is somehow unethical or manipulative. Whilst it is true to say that BeSci techniques like nudging can be used to bad ends, that doesn’t make them bad per se. I’ll leave a longer rebuttal of the ethical question to an essay entitled The Ethics Of Nudging by one of the godfathers of it, Cass Sunstein.
But I am conscious that in an industry with a history of wrong-doing, where regulators have specifically focussed on the misuse of BeSci by Firms, that we need to be extra vigilant in our use of BeSci interventions.
Not just because we’re told to, but rather because it’s simply not good business to deploy BeSci in a manner that is exploitative. If we use interventions, we need to ensure they stand the test of time and that they are genuinely delivering good outcomes. We want to avoid reactance in the moment and resentment afterwards.
F is for Fairness
We do this by ensuring that the idea of fairness is at the heart of any BeSci interventions we deploy. Practitioners of BeSci will be well aware of the EAST framework created by the Behavioural Insights Team.For the uninitiated, it’s a way of thinking about BeSci interventions. To encourage a particular behaviour, make it:
To ensure that all of our BeSci interventions start with the principle of Fairness, we’ve taken EAST and added an F for “Fair” to the beginning to make FEAST.
Whilst it isn’t always possible to make interventions that are simultaneously Easy, Attractive, Timely and Social, it is critically important that every single one deployed is Fair. In practice, this means a focus on two things:
Treating our customers fairly:
– is what we’re trying to get them to do genuinely in their best interests?
– have we been transparent in offering alternatives? – does our intervention inadvertently exploit information asymmetry?
Treating our employees with respect:
– is our proposed intervention appropriate?
Whilst it is, in theory, easy for designers of BeSci interventions to determine whether something is likely to be Easy, Attractive, Social or Timely, it’s somewhat harder to determine whether something is Fair. After all, if you’ve worked hard to design an intervention that you think is effective, then Confirmation Bias will probably allow you to conclude that it is.
Which is where Compliance and Risk can help by providing an independent perspective. Yet another reason I’m of the opinion that BeSci is a skill that should be in the armoury of all Compliance professionals.
The other reason I like adapting EAST to FEAST is that it allows me to use food-related imagery. Like the photo above.
As BeSci becomes more widely used, I think the question of Fairness is going to become more important. Which not only means the F in FEAST becomes even more critical, but also requires those of us promoting BeSci to spend more time thinking about what is truly in the interests of those we’re seeking to influence.
I sometimes wonder how I ended up working in a Compliance function. Like so many people who work in the area, it’s not something the younger me would ever have dreamt of becoming.
That’s not entirely surprising. As a piece of branding, it’s not exactly aspirational. Who in their right mind would dream of working in a role whose very title evokes bureaucracy and slavish adherence to rules reminiscent of an overly zealous parking attendant? Self-evidently the answer is: me!
With the huge benefit of hindsight, one reason might be that I’ve always been fascinated by what makes people “tick”; whether that’s understanding my own behaviour or that of others.
It’s a large part of what Compliance is all about. When we consider whether or not a Firm is compliant, what we’re really talking about is influencing the (in)actions of employees and arguably nowadays customers. Companies can’t, in of themselves be compliant or non-compliant; that’s down to the actions or inactions of those that work within them.
Behaviour is also a key driver of the other part of my job title: Operational Risk. When things go wrong in organisations, there is usually a human component. Whether a direct cause or in some form of contributory negligence. How often do we read about “Human Error” being a factor in something going wrong?
In my other blogs on Human Risk (“the risk of people doing things they shouldn’t or not doing things they should”), I’ve explored the science of how we aren’t the logical, rational beings we’d like to think we are.
In fact, we’re often precisely the opposite, with a Human Operating System designed for a bygone era.
Our brains evolved for a very different world than the one in which we are living…for a world in which people lived in very small groups, rarely met anybody who was terribly different from themselves, had rather short lives in which there were few choices and the highest priority was to eat and mate today
In that era, all of the emphasis is on the speed of decision-making. Note that really important last word: “today”. This desire for quicking thinking makes sense when you consider the homogeneity of their existence and the fact that immediate concerns were around subsistence and survival. A far cry from the world that you and I are fortunate to inhabit in the 21st century.
Take something like shopping. On the face of it, a simple modern equivalent of hunter-gatherer activity; only with a barter system that exchanges money for goods. Of course, it’s not that simple. Before we make the decision of what to buy, we’re bombarded with choice and tempted by seductive advertising that exploits our emotions.
Unsurprisingly, most of us will have bought items we later regret; things, for example, that we don’t really need or that aren’t really worth what we’ve paid for them.
I’m a particular sucker when it comes to buying and regularly upgrading Apple products. I do it repeatedly and often, even when I know that the additional features of whatever new iProduct I’m tempted by, probably aren’t the huge game changers the marketing and price point would suggest. But I do it anyway because it’s largely an emotional rather than rational decision.
My propensity to buy is increased significantly whenever there’s an Apple Store in the vicinity. It’s a 21st Century Garden Of Eden replete with technological temptations; ironically the latest incarnations even have trees growing in them.
Sadly for my bank balance, there’s a high correlation between the locations I visit on business trips and late-opening Apple Stores. A jet-lagged brain, egged on by prices in a foreign currency that I can mentally convert at a preferential rate, is no match for the persuasive powers of a super brand.
I’m not alone in this. We all make choices that are influenced by a whole host of factors beyond simple value for money when it comes to shopping. That’s because we are highly susceptible to being influenced by emotion over facts. It’s why the advertising industry focuses far more on persuading us to buy things because of how they’ll make us feel than on giving us facts about the product or service in question.
Of course, I’m being intentionally hard on myself. My decision making in buying from Apple isn’t entirely stupid; after all their products fulfil the practical purpose I require them for, are easy to use and aesthetically pleasing. There are perfectly good, if not better and cheaper alternatives available, but in buying Apple, I’m going down a tried and tested route where I know I’ll be broadly happy with my decision. I can also justify my decision, in the knowledge that I’m in good company; millions of other people make the same decision on a daily basis. Hold that thought on copying what others do, it’s a key factor in all of our decision-making. Apple is a safe option; albeit not the most economically rational one.
Shopping isn’t the only area of our lives where we deploy a much broader range of factors in our decision making than are considered by the traditional economist’s model of Homo Economicus (HE); who go about their daily business being consistently rational and efficiently following optimal, utility-maximising courses of action.
HE doesn’t exist. We all do things that can’t simply be explained by cold hard economic logic; whether (in my case, at least) it’s not getting enough exercise, the way I drive, not eating as healthily as I should or in how I cast my vote at the ballot box.
All of which is bad news from a Compliance perspective. Because if we want to influence behaviour, then we can’t just rely on people rationally doing “the right thing”. We need to get to work on the subconscious decision-making processes that influence us.
It’s all about the money
For those of us working in Financial Services, the situation is a whole lot harder. That’s because, just like shopping, money introduces a whole new level of complexity.
In their book Dollars and Sense (“Small Change” in some countries), Prof Dan Ariely and Jeff Kreisler illustrate some of the ways it impacts decision making:
The simple act of thinking about money actually changes us in deep and troublesome ways. Money is the top reason for divorce and the number one cause of stress in Americans. People are demonstrably worse at all kinds of problem solving when they have money problems on their mind.
If you work in banking, this is worrying on both a personal and professional level, given money is simultaneously the commodity our business deals with and at the heart of the industry’s incentive program.
This suggests that Homo Economicus Argentarius, a banking derivative of HE, is even less likely to exist than the non-banking counterpart. This is supported by this research which concluded that:
employees of a large, international bank behave, on average, honestly in a control condition. However, when their professional identity as bank employees is rendered salient, a significant proportion of them become dishonest.
This effect is specific to bank employees because control experiments with employees from other industries and with students show that they do not become more dishonest when their professional identity or bank-related items are rendered salient.
Whilst there are questions about the size of the sample used and the methods deployed in undertaking the research, the results don’t sound entirely implausible. After all, this is an industry that has demonstrated, on a number of occasions, that decision making hasn’t always been of the highest ethical order.
Rules don’t rule
The principle way in which my industry has sought to manage Human Risk and ensure Compliance is through use of rules. Lots and lots of them. Even in times of “light touch” regulation (remember those?), there were extensive rulebooks, governing what was and was not permitted. Nowadays the number and size of those books is even larger. Which has then been replicated within Firms in the way of policies and procedures that individuals are expected to know, understand and follow.
This is theoretically a good idea because writing down what is and is not acceptable means that no one can be in any doubt. People can refer to the rules and providing they comply with them all will be fine. It works extremely well in environments where following a strict set of protocols is an absolute necessity and where the situations people have to deal with are relatively predictable; such as in a nuclear plant or during a medical procedure.
It works less well in an environment where people are hired for a role which requires them to think creatively and where nuance exists. As technology takes over the more routine tasks, the activities which human beings will increasingly be undertaking in our industry will become more judgement based. That’s harder to write concrete rules for.
People need parameters, but they also need room to think. Make the world excessively rules-based and we discourage decision-taking and encourage “unthinking compliance” where behaviour is driven by fear of punishment and people base their behaviours on the rules rather than thinking about what they are doing. Meanwhile, intelligent people who want to find ways around the rules will do so.
If we want to incentivise people to “do the right thing” then we need to go beyond simply ordering people to follow policies and punishing them if they don’t. Tali Sharot, Associate Professor of Cognitive Neuroscience at the University of London, explains in her recent book The Influential Mind that
Our instinct when trying to influence other’s actions is to give orders. This approach often fails, because when people feel their independence has been limited, they get anxious and demotivated and are likely to retaliate. In contrast, expanding people’s sense of agency makes them happier, healthier more productive, and more compliant.
In other words, people don’t like being told what to do. Even when you are paying them. This applies in “normal” times, but particularly when people are under pressure and therefore more likely to make mistakes. That’s precisely when the default reaction of those trying to control behaviour is to double-down on traditional methods; more enforcement of rules and greater intolerance for breaches.
Do what I say…or else…
All too often the behavioural incentives which are deployed in the name of Compliance are extrinsic (do things because I tell you to) rather than intrinsic (do things because you want to).
Which brings me back to the decision-making involved in shopping. As we saw earlier, we’re not autonomous decision makers, but heavily influenceable.
At their most effective what advertisers use to persuade us to buy things are techniques that push our intrinsic rather than extrinsic buttons. Even when it looks like we’re being told what to buy, such as when a celebrity endorses products, it’s actually less about them telling us to buy something, but rather us aspiring to be like them.
To better influence our decision-making, advertisers have become experts at knowing how we think. In his book, The Choice Factory, Richard Shotton, Manning Gottlieb OMD’s deputy head of evidence (now there’s a job title!) explains this:
Behavioural science, the study of decision-making, is an importnat topic for advertisers as it provides a robust explanation about why people buy particular products. It recognises that peope are overwhelmed by the sheer volume of decisions they need to make each day., While these short-cuts enable quicker decision-making, they are prone to biases….If advertisers are aware of these biases, and adapt their products and communications accordingly, then they can use them to their advantage. They can work with the grain of human nature rather than unproductively challenging it.
If it’s good enough for advertisers then why shouldn’t we think about deploying some of the same techniques in the furtherance of our objectives? Both are seeking to influence decision-making.
The obvious counter-argument is that our regulators won’t let us. An objection that is beginning to be challenged. The UK’s Financial Conduct Authority, normally ahead of the pack on these matters, has recently published Discussion Paper 18/2 that includes no less than 20 references to the term “behavioural science”. Like this one:
Many decades of behavioural science research have shown that prescriptive rule-bound environments don’t build towards positive cultures and can lead to unintended and unwanted consequences (eg following rules without any sense of individual accountability or understanding of outcomes, or even ‘gaming’ the system)
So let’s bring a little more (behavioural) science into Compliance. Unlike that humanoid robot pictured at the top of this page, we function better if we’re incentivised, rather than told what to do. If we really want to manage Human Risk, then we need to make it easy and natural for people to do the right thing.
In my next blog, I’ll explore some ideas about how that might work in practice.
As a frequent traveller, I’m always intrigued by how airlines try to influence our decision making. Since becoming interested in behavioural science, I tend to notice them a lot more. Which means that I pay a lot more attention to the ones that annoy me or I don’t think work.
Like the screen in the airport lounge telling me that my flight is boarding; which results in me rushing to the gate only to discover they haven’t even begun the process. It’s a trick that works once. Because the next time I’m sat in the same airport, I’ll factor in that benevolent deception in my calculation of how much time I’ll need…
Or the small yellow tag which British Airways staff are asked to attach to short-haul hand luggage which is small enough to fit under the seat in front. Having the tag attached offers passengers the apparent reward of having their bag “Guaranteed on board” as long as they comply with the requirement to put it under the seat in front of them. “What’s wrong with that?” I hear you ask.
On the one hand, it’s a simple technique designed to ensure that the space available to store hand luggage is maximised by seeking to incentivise people to use the space under the seats.
On the other, it’s an irritating reminder of the fact that you have to pay extra to put luggage in the hold; which is a major reason why there is so much hand luggage on board in the first place. And don’t get me started on those times when an agent who has just confirmed with me that I’m sat in an emergency exit seat and therefore need to comply with specific requirements (like not putting anything under the seat in front) then insists on adding the tag that tells me to do precisely the opposite.
Another pet hate of mine is being bussed between plane and terminal. I presume it’s caused by the fact that there isn’t enough capacity at the airport or the airline hasn’t paid enough to use a proper gate. What I’d (possibly unfairly) classify as poor planning or false economy.
Surprisingly some people prefer the bus. Or rather, have been persuaded that it’s a better option. In this Spectator magazine article Behavioural Science maestro, Rory Sutherland enthuses about a pilot that announced the fact they’d be transferring to the terminal by bus by highlighting the fact you don’t have to walk. He concludes that:
The reason we hated being bused to the terminal was not because it was intrinsically bad, but because nobody knew of any redeeming advantages to help us see it in a positive light. Once we knew there was an upside, we were free to minimise the pain of cognitive dissonance by choosing to see the bus as a convenience and not an annoyance.
I’ve heard a similar announcement to the one Rory did on a few occasions; but rather than being impressed by it, I was incredibly annoyed that someone was seeking to make a virtue out of necessity. It’s right that a bus means less walking. But it also means more faffing around as we wait for everyone to board and then stand in discomfort for what seems like an eternity. Plus if you’ve got a seat that allows quick disembarkation, any advantage you had is eroded by the busathon. Even if the bus gets you there quicker, it doesn’t feel quicker. I already spend enough time being shepherded around, that I’d prefer the feeling of being in control that I get when I’m walking through a terminal. It also keeps my Fitbit incredibly happy.
I should add that Rory also came up with the lovely idea of diverting funding from a proposed high-speed rail link into improving customer experience on the existing one. Tongue firmly in cheek, he proposed having models serve champagne as a means of making the journey more “bearable”; rather than make it shorter, spend the money on making it more pleasurable. I’m not sure you’d get many investors backing the plan, but I like his thinking…
The difference in perception between Rory and I when it comes to being bussed from plane to terminal illustrates an interesting point. I suspect that I fly more frequently than he does and I know “the form”. Which is another way of saying that I’m rather set in my ways. I’ve got my airport routine down to a fine art and the last thing I want is for that to be disrupted. Ironically, in an environment where I’m constantly being told what to do, I’ve developed a behaviour pattern that allows me a sense of control. I might not be able to do anything about air traffic delays, but I know how to efficiently expedite my own passage through airports.
So, I will automatically use the space under the seat in front of me to store items if I possibly can. Because I know that the overhead bins are likely to fill up and there’s a risk that my things get moved further down the plane, when the inevitable luggage in locker reshuffle takes place, thus impeding my ability to exit swiftly.
I know that flights board well before the time they take off and that some gates are a long way from the security checkpoint. I’m even sad enough to have an airport map app which I use to check if I’m in a terminal I’m unfamiliar with. So I’m far less likely to hold up a plane by wasting luggage space or being late to the gate.
All of which makes me suspect that all of the behavioural science techniques the airlines are deploying probably aren’t really targetted at me. After all, I’m already massively compliant. They’re intended for the less frequent traveller; the kind who goes through security having been asked to empty their pockets sets off the alarm and then looks bewildered when it is explained to them that it’s the set of keys they’ve kept on them that’s caused it.
Or the person I saw recently at Berlin Tegel airport (where they do security at the gate). who had gone through security and then asked to be let back out again to get food. Upon returning, they were genuinely astonished that a second security scan was necessary (“but you’ve already checked me”). These people probably do need (not so) subtle nudging in the right direction.
Its a fairly obvious lesson when we think about deploying behavioural science techniques: what works for one subset of the population, might not work for everyone. Overexposure to particular techniques is likely to confirm the old adage that “familiarity breeds contempt”. The question for airlines is whether there is a greater good achieved by annoying people like me who, by being frequent flyers, are also likely to generate more revenue for them. I suspect the answer is that it is because these techniques are largely trying to influence behaviour that makes flying more punctual and safer. Which logically has to also be in my interest.
It also poses a dilemma for airlines when they work out how to get us to pay attention to safety briefings. This is harder than one might think, as Tali Sharot explains in her book The Influential Mind:
You would think the passengers would be a captive audience; they are literally stuck in their seats with nowhere to go. Yet a quick look around will confirm that most people would rather entertain themselves than pay attention to the crew. You may argue that we have all been through the drill before: seat belt, oxygen mask, life jacket, exit door—we get it. But the fact of the matter is that different airplanes have different safety features. In fact, even if you have flown on the exact same aircraft before, you should listen closely. This is because rehearsing the safety procedure just before takeoff reactivates the required sequence in your brain, which makes it more likely that you will execute the actions automatically if needed. In a state of emergency, quick reactions are crucial.
Sharot explains that the way airlines deal with this:
Preflight safety demonstration videos now include everything from models break-dancing in bathing suits to cute cartoons and stand-up comedy. Many highlight enchanting travel destinations. And people watch them, because they fulfill at least one of the principles that make people want to pay attention: they induce positive emotions.
Of course, that only works up to a point. We can only watch the same video a certain number of times before it becomes less compelling. So airlines need to produce new content to stimulate us. On that, a “very well done” to Air New Zealand who consistently and regularly create engaging content for their safety briefings and a “take note” to British Airways who have now been running one involving celebrities for rather too long.
I must admit to being somewhat inattentive to briefings. But I do check where my nearest emergency exit is and whether I’ve got a life jacket under my seat. That’s because I once went on a British Airways safety course where I experienced a cabin being filled with smoke in a simulated emergency. It’s pretty scary, even when you know it’s a drill and the smoke is only white…
The interesting question for those of us that want to use behavioural science to manage Compliance, is how we maintain the interest and cooperation of those who already know what they need to do, whilst influencing the behaviours of those who don’t. If we want to succeed then we need to persuade but not irritate.,
A challenge, that pales into insignificance when we think about the subset of people who think they know what they need to do but actually don’t; the Dunning Kruger passengers. Precisely the people that will pose the biggest risk in an emergency. Naturally, I’ve concluded that I’m not one of those. Which is somewhat naive. After all, if I was one, then I definitely wouldn’t be aware of it..
I’m in Kyoto on vacation with my girlfriend.As well as visiting as many sights and eating as much Japanese food as possible, she wants to go shopping.This makes perfect sense; Japan offers a singularly fabulous retail experience. With the exception of my disappointment at being unable to buy any of the iconic selection of locally designed Converse because they don’t generally stock shoes in my size (13 US), it’s a shopper’s paradise.
As if we needed more reasons, the Japanese government currently has a campaign to promote Japan as a Tax Free destination for tourists,There are signs everywhere announcing this fact, with its own logo.As ever in Japan, its a masterpiece of design.
The behavioural scientist in me is bemused and wants to channel my inner Dan Ariely; for the uninitiated, he’s the co-author of a rather good book called Dollars and Sense (or Small Change in some countries) that explores quite how irrational we can be when dealing with money. You can read an excerpt here in which the authors explain how shoppers reacted when JC Penney, a US retailer renowned for heavy discounting, switched to a policy of not doing so, whilst maintaining the same level of overall pricing.
Spoiler alert: they don’t like it at all; in fact they’re more focussed on saving money than on the absolute amount they’re spending. Probably something I should think about when I’m presented with the opportunity to reclaim tax.
Obviously offering me a tax rebate is an attempt to persuade me to spend money I wouldn’t otherwise; but is it effective? Presumably the Japanese government thinks it’ll have a net positive effect; either encouraging more visitors or more spending by existing ones.
The scheme works by offering tourists a tax rebate on individual purchases above ¥5,000 (just under US$50).The standard tax rate is 8% so it basically means that for any single purchase with one participating retailer above that limit, you don’t pay tax.
Sounds simple, right? Well it is…and it isn’t.
On the face of it, the ¥5000 limit is a nice round number which is cleverly positioned to be achievable by most shoppers. Yet it’s probably more than many people (ignoring high rollers for whom tax is likely to be a marginal consideration) will ordinarily want to spend in one purchase.And 8% is almost 10% isn’t it, so there’s probably an element of rounding up that goes on when calculating the savings we’ll be making.
Where it works really well (for the retailer) is that tourists attracted by the discount are likely to focus heavily on buying things that get them a tax saving. By pricing individual items cleverly just below that limit, in what I’d call the “zone of doubt”, retailers can use the tax rebate to cunningly persuade people to spend “that little bit more” to get over it.
There’s also a fabulous psychological trick at work here. Unlike most other retail offers, this one changes the purchasing dynamics. Because the source of the discount isn’t the retailer but the government, it is no longer about whether the retailer can do a deal with the customer.Instead the retailer shifts from counterpart to ally in a game that involves getting money from the most hated part of any government, the tax authority. We all like getting one over on them; even if it’s not a government to whom we’ve paid anything beyond consumption taxes.
The ¥5000 limit is also deceptive. Imagine you’re in the “zone of doubt”; how much extra should you spend?It’s not immediately obvious. Here’s the answer: you should only spend more to save tax if you’re already spending ¥4630; that’s the level at which your total expenditure will exceed ¥5000 inc tax. (¥5000/1.08 =¥4629.62; rounded up).This took me time in a darkened room to calculate, not something I’d work out in a neon-infused store with a shop assistant on my shoulder in the midst of what Germans call Kaufrausch. Yes of course, there’s a German word for the high that comes with a shopping spree.
The average shopper will understandably focus on the ¥5000 as a psychological anchor point that has no bearing on the price they ought to be happy to pay for any individual, or combination of, items. Yet the chances are the closer a customer is to being just under that price point, the harder they’ll feel compelled to go beyond it to save tax. Which might not be logical at all.
Then add in the fact that goods are stickered with the pre-tax price (a legal requirement that’s not entirely inconvenient for retailers) which means that all that happens when you take advantage of the offer is that you’re paying the price displayed. A beautiful piece of behavioural science trickery that ends up with you spending more money than you’d originally intended. You had me at tax free…
Unless, of course, you’re spending well above ¥5000 at which point there is definitely a discount to be had.As long as the item is reasonably priced in the first place and you really want/need it. This requires you to correctly calculate the exchange rate and have a means of paying that offers you the actual rate you’ve used; which, let’s be honest, is likely to involve a round number for ease.
Four Eye Checks
As if the tax trickery weren’t enough to contend with, I have my own personal cognitive blindnesses.
My girlfriend now tells me that she wants to buy some glasses.I’ve decided, based on nothing beyond pricing prejudice, that Japan is not the place to buy them because they’ll be expensive, so I’m totally disinterested.And she knows it.Double fail there.
Fortunately, she’s smart enough to ignore me.Whilst navigating Kyoto train station, we come across a really cool looking glasses store (trust me these aren’t just opticians!) and go in.She books an eye-test and whilst waiting ‘eyes up’ a few pairs, pick one and goes off for her test.Literally a few minutes later, she’s back, having not only had the eye test but paid for her new glasses.Total cost ¥5,000;yes you read that right.Including the eye test, frames and lenses.With 6 months to go back and change any of it at no charge, if she doesn’t like it. What’s more it’s a bargain that plays absolutely no games with the tax free limit; it’s bang on it!To complete the experience we can pick them up in 30 mins.
At this point, something in me flips. Because I really hate going for eye-tests. In fact I’ve not been for once since 2011.My cognitive biases are in full effect here; Wilful Blindness means I don’t want to go and be told my eye-sight is worse than it once was. Confirmation Bias tells me that this process will take a long time, require me to confirm my own physical disability and will inevitably result in the salespeople trying to sell me contact lenses and other products.I’ll end up spending a fortune only to feel awful.
In spite of myself and under encouragement from my girlfriend who displayed her own Confirmation Bias (“I’ve done this so I can make myself feel better by persuading him its worth doing”) and played to my Social Bias (“she’s done it so it must be good”), I try some glasses and book an eye test.In a repeat of her experience, inless than 5 mins my own glasses are being put together and will be ready for me in 30 minutes.
I’ve literally gone from “why am I here?” to “I’ll have those please” in a product segment I was avoiding, within 5 minutes.30 mins later we collect our glasses.We’re both thrilled with the result.If, dear reader, you’re interested in the retailer’s name, I’ve posted a link at the bottom.
And that ladies and gentlemen is the Human Risk lesson here. I’m totally irrational when it comes to something as simple as shopping.
The reason I didn’t want to go for an eye test (in the UK) was the fact that I hated the process.Both the test and the resultant sales performance that involves being sold things I don’t want.And then there’s the money involved which is never cheap. This was quick, simple, customer focused value for money.Plus they’ve turned buying glasses into an impulse purchase.
Which brings me to the point of the blog. Firstly it’s to note that tax free is not always that bargain it seems.
Secondly, go have an eye test.My reasons for not going were terrible and it’s important.Be less like me.
Thirdly, Dan Ariely is right. I’m nowhere near being anything approaching a rational shopper. So, dear reader, never let your biases stand in the way of a good outcome. Whether that’s Confirmation Bias (“saving tax means spending more money is always right”, “glasses are expensive”, “the test will take ages”), Wilful Blindness (“I don’t want an eye test because it’ll tell me I’m more blind than I thought I was”) or Decision Fatigue (“I’m tired so can’t be bothered to do this”, “reclaiming tax is hard work”). Although they’re evolutionary instincts, each one of them worked against me.
Luckily I’ve got the best form of mitigant to this:a girlfriend who is a strong influencer in my decision making. I may have my biases, but she helps bring a diverse perspective to them.That, behavioural science and common sense tell me, is more likely to deliver a better outcome for me as an individual. Just goes to show the importance of a four-eyes check. Pun fully intended.
I’m not going to show you a picture of me in my new glasses. Because, let’s not forget, the primary objective of having glasses is to improve my eyesight. You need to see things through my eyes. So to prove how amazing they are, here’s what one of Kyoto’s sights looked like without my new glasses: