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How Behavioral Economics Is Reinventing HRM?

By Sthitaprajnya Panigrahi

Considered as the backbone of any organization, Human resources play a vital role in being the deciding factor of the success of any organization. Mostly based on outdated ideas of organizational design and human psychology, the fundamental management and HR practices are residing in a dire need of modification. Reflecting best understanding of human psychology, HR practices like every other organizational programs need to be tested and authenticated. Emerged as a new discipline for the HR leaders, Behavioural Economics is a hybrid of economics and human psychology. Impacting on the management, regulatory and economic decisions of the organizations; the concepts of Behavioral Economics offer us equipment to contour programs, strategies, and commodities in a human-centric spirit.

The below-mentioned points might help to understand the Behavioral Economics in a better way and how is it affecting the management of human resources in a positive way:

  1. Incorporating Innovations: Someone correctly said money cannot buy innovations as employees often feel motivated by professional pride, justice, accomplishments, and acknowledgments. As much as it is a necessary factor to implement motivation among the employees, the leaders must learn the behavioral concepts to master the strategy. Providing the employees with better treatment, recognizing their efforts, efficiency, and accomplishments along with the acceptance of failures can boost the morale and spirit of the workers.
  2. Improving Decision Making: A quick decision often goes futile. But sometimes within the boundaries of time constraints, a quick decision is certainly a need of the moment. Adopting a deliberative mindset prior to decision making, where an individual tends to focus on the available information to draw a plan or insight; he/she gradually continues towards the implementation mindset in the post-decision stage, becoming committed to the conduit of action. An excessive risk factor, application of tactics such as proper analysis, focused study and bringing unbiased outsiders into the conversation can assist in effective decision making.
  3. Overcoming Mental Bias: Rather than implementing changes and innovations, the employees often feel comfortable to remain glued to the traditional methodologies and formats. In the process of fear of change, exposed to alterations, risks, and skepticism often lead employees to miss the available opportunities. These behavioral hurdles require additive innovations, initiations along with additive manufacturing.
  4. Enhancing Behavioural Communications: Regular communications often fail to achieve the desired results. Implementing smart and subtle communicative ways to interact can accurately address the valid information as per the requirement of the conversation. By knowing the audience and gently nudging them towards the desired direction can be termed as a proper and proficient way of behavioral communication.
  5. Better Thinking Capability: Although some situation requires fast thinking and quick decision making, slow thinking often considered as an efficient way of thinking. Leading us to destructive decisions fast-thinking sometimes turns to be self-destructive by poor strategic decisions and utterance of wrong things during conversations. By continually processing automatic thoughts during fast thinking the employees need to proceed towards slow thinking in a complex but deliberate way of thinking. Apart from it knowing the limits and accessing the positive mindset, the employees can analyze the stressful scenarios which will help them in enhancing their thought process for future occasions.

HR-professionals are often considered as the architects and designers of the employee management process aiding benevolently for the ultimate success of the organization. By applying the proven principles of Behavioral economics to amend the existing HR programs, the management system of human resources in an organization will be more scientific, effective, influent, and more human-centric.

 

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