Change management and the brain

Change isn’t only necessary in the business world, it drives success. 

But the biggest obstacle to change often is internal. Many employees resist change, sometimes for reasons they can’t clearly identify.

As a behavioral economist, Melina Palmer aims to improve organizations’ understanding of internal resistance to change, as well as other elements of economics and psychology that drive companies’ internal dynamics.

Behavioral economics combines the study of economics, psychology, and neuroscience. Bloomberg lists “behavioral scientist” as the top job of this decade because it’s so important to understanding human behavior as it relates to our daily habits, 99% of which are unconscious. 

Palmer recently released her second book, “What Your Employees Need and Can’t Tell You: Adapting to Change with the Science of Behavioral Economics.” 

In addition to running The Brainy Business, where she serves as “chief behavioral officer,” Palmer hosts The Brainy Business Podcast.

Palmer began her career in credit unions, where she developed an interest in behavioral science and psychology.

“I like to say that if traditional economics and psychology had a baby, we would have behavioral economics,” Palmer says. “Traditional economics assumes logical people making rational choices in everything they do. That's not the world we live in. 

“Those models were wrong,” she continues. “They didn't accurately predict behavior. They were predicting what we think people should do versus what they actually do. Behavioral economics helps determine how the brain really makes decisions.”

The human brain makes 35,000 decisions a day, the vast majority of which are unconscious. Behavioral scientists call these subconscious decisions, most of which are made quickly and automatically, System 1. 

The slower, more manual processes of the brain are called System 2.

Behavioral scientists often cite a metaphor of a rider and an elephant to describe the two systems.

“The conscious, logical rider has a plan and knows where it wants to go. This is our System 2,” Palmer explains. “Unfortunately, it's at the mercy of that subconscious elephant, System 1. If the elephant wants to sit down or run in another direction, the rider is at its mercy because you can't push, pull, or use logic to make it go in the direction you want. 

“Instead, if you understand what motivates the elephant and communicate to it in that way, you can get to where you're looking to go,” she says. “That's really what behavioral economics is about. ”Managing change often comes down to managing those unconscious tendencies and biases, Palmer says.

“When we think about change in an organization, we think about big stuff,” she says. “We've got a CEO retiring, we've got a merger, we've got a core conversion—something big that may impact behavior or require a project, team, or the project management department to step in. But when it comes to the way our brains process and think about change, it’s really in those micro moments, thinking again about those 35,000 decisions that we make every day.”

Within those micro moments are hidden biases, which often hinder employee’s ability to manage change. 

Consider a few common biases, which often affect change within organizations:

• Status quo bias: When given a choice, people tend to favor the status quo.
• Endowment effect: An emotional bias that causes individuals to value an owned object higher, often irrationally, than its market value.
• Loss aversion: The pain of losing something is psychologically as powerful as the pleasure of gaining something else.
• Naïve realism: The belief that, unlike other people, we see reality exactly as it is.
• Optimism bias: Our tendency to overestimate our likelihood of experiencing positive events and underestimate our likelihood of experiencing negative events.

Most of these examples are tendencies people experience at times, Palmer notes. As a classic example, she points out optimism bias and nearly everyone’s near-certain belief that they’re better-than-average drivers. Empowerment lies in our awareness of these.

“Change isn’t really about change but about how it’s presented and whether people are going to feel good about it,” Palmer says. “It’s not about getting away from people’s natural habits, it's understanding them so we can know which ones to leverage and work in our favor so people will be more receptive or enthusiastic about change.”

Change is a nuanced proposition, she says, regardless of how it’s framed, much like the brain itself. Two employees can receive the same message and have completely different reactions. 

Before sending an email or meeting with employees, she says managers should identify: 

• Why you are reaching out in this way at this time.
• Where the employee is now.
• Where you are directing the employee to go.
• Paths to get the employee to the destination.
• Points where errors are likely to come up and how you can guide the employee to maintain the desired path.

Organizations ultimately are built on relationships, and relationships are built on memories, she says, citing a quote from Psychology Today: “Like a character made of Legos, we’re built of blocks of memory that all fit together to form our consciousness.

“There’s so much that's empowering in realizing that if you just adjust the way you present information, it can make those relationships more smooth and productive,” Palmer continues. “It can make everything better with small tweaks that don't have to cost a lot of money or take a lot of time. They save time in the long run because time pressure and deadlines impact how we react to change.”