Our firm has been binge reading behavioral economics books for the past year. Compliance remains a people business. And behavioral economics is the study of why people do what they do.
In their book, Nudge, Richard Thaler and Cass Sunstein look at behavioral economics as a type of “choice architecture.” The book describes how choice architecture touches various aspects of our lives—whether we opt in or out of something, and how we are more likely to make certain selections based on how they are worded or organized because of the way we think. Thaler and Sunstein argue that if we understand behavioral economics, including biases, etc., we understand how the way in which we organize information and choices make it more or less likely someone will choose a particular option. In October, Thaler won the Nobel Prize for Economics for his work.
Thaler and Sunstein’s idea of choice architecture largely overlaps with the modern idea of “design thinking.” The dean of design thinking is Don Norman, the author of The Design of Everyday Things. The book is fascinating. Want to know why the iPhone is designed the way it is or why some doors are easier to open than others? Read Norman’s book. Interestingly, Norman notes that we usually only notice bad design—and after reading his book, you’ll begin to notice a number of bad design choices. Recently, two of us were at a steak restaurant in Argentina with one bathroom at the back of the restaurant. It had a red door and was located in the center of the wall exposed to patrons. The door had a large handle on it. We watched bemused as customer after customer came and pulled the handle. The problem was that the door only opened if you pushed it. But instead of a flat metal surface signaling to push, the handle signaled a pull. Norman points to similar examples that exist everywhere around us.
Thaler and Sunstein note that design can have an impact on our actions. For example, the new version of Microsoft Outlook that our firm now uses forces users to include only one space after each sentence. Since elementary school, we were trained to include two spaces between each sentence. To discourage us, Microsoft puts an extra period after a double space, which then requires the user to go back and delete one of the periods. Slowly, we are only using one space, but only because someone at Microsoft decided that we should. This kind of push is everywhere—from default fonts to safety features in automobiles. Start looking and you’ll notice them everywhere. And you notice things that do not make sense. Once you start, it is hard not to morph into Curb Your Enthusiasm’s Larry David, creator of the hit 90’s series, Seinfeld.
In Curb Your Enthusiasm, David’s character relishes poking fun of social norms and design. In an episode of Curb, Larry borrowed Ted Danson’s new Tesla and was issued a citation when the car’s horn produced a long honk instead of a short beep when Larry wanted to give a police officer a nudge after he didn’t drive forward when the traffic light turned green. David complained to Ted that the horn was supposed to just make a small beep when tapped instead of blasting the police officer (who issued Larry a citation). Seinfeld was also replete with examples of David (as creator) and Jerry Seinfeld using observational humor to poke fun of both product and social norm design. In his book, Norman notes good engineers understand their users (the core principle of design thinking). And as Thaler notes, by understanding users, you can push people to make certain choices. Symbols can help. Thaler and Sunstein note that by putting a fly target in the bottom of men’s urinals, the Amsterdam airport reduced filth in airport restrooms (and presumably cleaning costs).
Compliance professionals face the same challenges. We have to ensure that policies and procedures are simple and understandable. Training has to make sense. And the entire compliance program should focus not on a regulatory requirement, but the end user. For example, if you are drafting a policy or procedure or conducting training, you have to understand what you want people to do, and how to make them do it. What are the environmental challenges that may make compliance difficult? For instance, if you want people to put a dangerous chemical in a receptacle instead of pouring it down the drain, where is the receptacle—have you made it easy to comply? Norman, using the example of Toyota Motor Corporation’s 5 Whys, notes that root cause analysis looks at the environment instead of just the actions of a particular person. Norman understands that training does not solve all compliance problems, particularly if there is a design flaw.
To be a better compliance professional, you have to be Seinfeldian and question why people act the way they do. Evaluate the design of the program, the operating environment, and focus the program on the end user. When you draft policies or procedures, consider whether symbols or other teaching aids can help instruct the end user on how to comply. Look at who will use the policy and where. When you go to the restroom in a restaurant, you see instructions for employees to wash their hands (frequently) accompanied by an image of handwashing. Norman notes that when you see a door panel, you push, but you pull when you see a handle. Policies and procedures can send the same messages. Try a list of things not to do followed by a stop sign. An icon with a magnifying glass to explain agent screening. Obsess about program simplification and making compliance work seamlessly for the business and end user. View compliance problems through the lens of the business and its stakeholders.
There are numerous ways to communicate messages that will fit particular audiences, but the key is to try to understand the audiences and design a compliance program that pushes them towards compliance.
Ryan McConnell, Meagan Baker, and Stephanie Bustamante are lawyers at R. McConnell Group—a compliance and internal investigations boutique law firm in Houston Texas. www.rmcconnellgroup.com. @Microsoft–What’s the Deal with the Double Space? Follow the firm on Twitter at @rmcconnellgroup.