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Lockdown and crisis: why now is THE time to look at behavioural risks

This current situation has a tremendous impact on our behaviour. It is crucial for leaders to understand behaviour in this new situation, the risks it drives and to act upon them in a timely manner. This article provides insight into what causes behavioural risks during the current situation and provides advice to leaders to effectively mitigate these risks.

What causes behavioural risk to increase during the Covid-19 crisis and lockdown situation?

Obviously, when people work remotely, there is less oversight of their behaviour. As such, the opportunity increases to (sometimes unknowingly) take excessive risks, deviate from agreed processes or behave inappropriately.

Furthermore, in many cases the new work processes and procedures had to be designed practically overnight. It is hence likely that – initially – less attention has been devoted to incorporating proper checks and balances.

These inherent drivers of behavioural risk related to the Covid-19 crisis, are complemented by the following insights from behavioural science that are associated with behavioural risk:

1. Increased pressure to perform

The current (market) conditions likely lead to employees experiencing an increased pressure to perform. Three insights from behavioural science shed a light on why this increase in (perceived) pressure drives behavioural risk:

a. Action bias: people have an impulse to act (and act quickly) in order to gain a sense of control over a situation. Due to this innate human bias, people are more likely to take actions they would not take normally, in order to feel ‘they at least did something about it’.

b. Hot state decision-making: under influence of their emotions, people make decisions ‘in the moment’ that they would not make when they would carefully consider them. Under stress, our brains are less capable to think and rationally weigh outcomes of our actions. This may be exacerbated by personal stress people feel causing cognitive overload and distraction. Hence, people take more risk than they would in a ‘less hectic’ situation. In addition, a crisis increases people’s natural tendency to choose short-term gains over long term ones; a cognitive bias that behavioural scientists refer to as the present bias.

c. Ethical fading and moral justification: when people feel they must perform, they are likely to neglect the ethical dimensions of a decision because they are focused on other elements of the choice in front of them, such as making profit or solving a problem (ethical fading). Due to pressure, people unknowingly develop a blind spot for what doing the right thing is. And when they do see that something is unethical, they are more likely to justify it because of the extraordinary situation we are in (moral justification).

2. Increased psychological distance

Working remotely creates distance between people, that can be associated with the following insights detailing how psychological distance drives behavioural risk:

a. Out of sight out of mind: we are social creatures and have an innate longing for contact with each other. When (perceived) connection with others decreases, it may lead to people experiencing more psychological distance to their colleagues and to the firm they work for. This can in turn lead to demotivation and an increased conduct risk: work all of a sudden seems further away and rules and regulations we need to follow seem less important.

b. Shifting identities: Social Identity Theory states that people’s behaviour is impacted by the social group they feel they belong to. When working from home, the social identity as a ‘family member’ tends to become more salient, taking over from their social identity as an employee as the primary social identity during working hours. This directly drives behavioural risk: it might lead to people weighing interests differently and taking riskier decisions.

c. Losing ethical cuesgroups are our moral anchors (quoted from prof.dr. Naomi Ellemers). Our social context helps us to understand what doing the right thing is, by providing us with ‘social cues’. This helps us to deal with dilemmas. Our social context also corrects us when necessary. In addition, psychological distance negatively impacts psychological safety people experience to speak their minds, hindering people to speak up about their doubts and concerns.

What are effective ways to manage this increased behavioural risk?

All in all, the characteristics of the current situation mentioned above form fertile soil for behavioural risk to root and blossom. It is crucial for leaders to recognise these drivers of behavioural risk. This way they can remain alert to spot early warning signs of behavioural risks, they can design strategies to prevent future issues and they can actively discuss these themes with

Leaders can do various things to effectively mitigate behavioural risks and prevent future issues:

  1. Assess the new ways of working
    Review new processes and procedures that employees follow when working from home, and specifically look at not what is designed but at how these affect people’s behaviour in practice. What risks might people be inclined to take? How do you control these risks? What additional checks and balances can you build in?
  2. Encourage speaking up by fostering psychological safety
    To encourage people to keep speaking up and challenge decisions taken, leaders are advised to foster a climate of psychological safety. Create space for employees to express their concerns and discuss the dilemma’s they experience. It might help to appoint a ‘digital devil’s advocate’: someone that has the explicit task to challenge when tough decisions need to be made.
  3. Provide real (virtual) connection to employees
    Due to the corona crisis, most communication occurs through virtual channels. This can have negative effects on trust, communication and connection. Provide optimal virtual connection and do personal check-ins, keep people pro-actively informed of developments and schedule informal contact moments.
  4. Stress the social identity of the team
    As a leader it helps to proactively name the collective (‘we are in this together’). This stimulates the feeling to belong to a group and ensures that people are less likely to be in it for themselves. This can also help in keeping the organisational values and norms salient when that professional social context is further away.
  5. Encourage employees to focus on integrity
    The 2007/2008 financial crisis has taught us that behaviour is an important determinant for future issues. Understanding what behaviour takes place during this crisis, and encouraging employees to do the right thing and make integrity-driven decisions can help to prevent misconduct.
  6. Foster ownership
    A strong leadership can give the impression that he/she coordinates and oversees, which may make people behave less proactively because they feel less responsible and accountable. By empowering people they will take more responsibility themselves. Examples are to make people think about how to save costs and give them insight into financial challenges.
  7. Balance speed with reflection
    A crisis requires rapid decision-making and action. On the other hand, it is also essential to encourage employee to build in sufficient reflection moments for crucial decision-making. This will prevent ‘hot state decision-making’. First make sure you calm down, take a step back and also think about the long term, before decisions are made. Leaders should actively create space for employees to reflect on the various dimensions of their decisions.

In sum, the grand piece of advice to all leaders is to focus – now more than ever – on the behavioural risks that might occur. Organisations that effectively design strategies to deal with these risks increase their chance of positively coming out of this crisis.

To aid companies in ways to mitigate behavioural risk during the lockdown, we have developed a method to conduct a first assessment of behavioural risks in your organisation in times of crisis. As such, we can help you identify what behaviours and drivers of behaviour to pay attention to in your organisation.

Furthermore, we have developed several live online learning programs/sessions focusing on working together virtually and on identifying behavioural risks in your own organisation. These include guidance on virtual collaboration, leading virtual teams, and deep-dives on themes as ‘how to foster psychological safety’ or ‘speaking up’. The programs and sessions we offer are easily deployable with short online webinars that concentrate on helping people to get started with identifying behavioural risks in your team or department, mitigating these risks and working remotely in an effective manner.

Finally, we have developed several interventions to keep integrity high on the agenda and to raise awareness for leaders regarding new behavioural and integrity risks.
You can think of inspiring podcasts or gaming and gamification interventions like a digital dilemma card game, an integrity judgment interaction game or a custom made compliance game.

In case you are interested to hear more, please feel free to contact Femke de Vries or Wieke Scholten.

Author: Wieke Scholten

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