Sludge by Cass Sunstein
Harvard Law professor Cass Sunstein is best known as co-author, with Nobelist Richard Thaler, of the multi-million selling book Nudge. The idea that the behaviors of citizens and employees can be steered in a way that is beneficial to them have taken root worldwide. Today, there are hundreds of behavioral science teams, often called “nudge units,” in governments and corporations around the world.
The common strategy of the most famous nudge interventions is to reduce or eliminate effort for the beneficial outcome. So, instead of filling out a form to join a retirement savings plan, the employee is opted in automatically but can easily opt out if desired. This simple intervention has helped millions of people save more for their retirement, a goal that benefits both the individual and society as a whole.
A similar opted-in approach has increased the number of people volunteering to donate their organs after death.
Nudge vs. Sludge
If nudges have a mortal enemy, or perhaps the equivalent of antimatter to matter, it’s “sludge.” Thaler and Sunstein use this term to describe unnecessarily effortful processes, bureaucratic procedures, and other barriers to desirable outcomes.
Cass Sunstein, now in his second stint in a White House role, has exposes this conflict head-on in his new book, Sludge: What Stops Us from Getting Things Done and What to Do about It.
He shows how the most effective government programs, Medicare and Social Security, reach almost all eligible citizens because the government does the recordkeeping and offers simple enrollment processes to receive benefits. (Some financial planners might argue that it’s a bit too easy to apply for Social Security. Many people would be better off delaying that application to increase their monthly benefit amount.)
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Other programs have more complicated processes. The forms are complex, verification of eligibility may be time-consuming, and applications can be rejected for missing or incorrect information. These programs may reach only a fraction of those eligible.
De-sludging to help children
In my recent interview with Sunstein, he pointed out that those most in need of assistance programs are often the most affected by sludge. “Cognitive scarcity” is one issue that he found affected participation in school lunch programs for kids in need. If a parent is focused mostly on work, child care, and putting food on the the table, filling out a complicated government form seems particularly off-putting. The parent may also fear getting in trouble for submitting the form.
The solution to enroll more needy kids was “direct certification.” School districts or localities could simply certify that a child was eligible for free lunches without parent form filling or arduous verification steps. Fifteen million children have accessed free lunches via direct certification programs.
“The level of sludge went from pretty high to zero, and when it went to zero the number of kids went to millions,” Sunstein said.
Business has sludge, too
As I describe in Friction, companies like Amazon and Uber have disrupted industries by making customer processes effortless. A more recent example is Zoom, which blew past much larger competitors by internalizing their mission statement, “Make communications frictionless.”
Today, we see fintech firms taking on traditional banks by making the complicated easy. The biggest consumer lender in the U.S. today isn’t a global bank brand, it’s Rocket Mortgage. Their motto is a clue to their success story: “Push button, get mortgage.”
Some sludge is intentional. Processes are deliberately difficult when they might cause the company to lose a customer. The largest financial newspaper makes it easy to subscribe, but to cancel a subscription can require a phone call during business hours and dealing with more than one representative.
High friction processes designed to benefit the company but not the customer fall into a category called “dark patterns.”
Just the fax
I recently tried to cash in a small, inherited life insurance policy. There was no way to do that online. Rather, I had to call their call center and speak to a representative. That person couldn’t complete my request, but offered to send me a form by email or postal mail. The form wasn’t online, nor was electronic signing an option. I had to send the completed form back via fax (really, in 2021) or postal mail. Processing took weeks. Is it any wonder that upstarts like Lemonade are rapidly siphoning customers away from traditional insurance firms?
More commonly, sludge in businesses isn’t difficulty by design. Rather processes were put in place with good intentions. Returning a product requires getting approval from a call center agent. Replacing a broken office printer needs a requisition form approved by a manager. Expense reports must follow a rigid format, are carefully checked for compliance with all rules, and require a manager’s signature before reimbursement.
Friction Audits
Chances are, your organization is wasting effort in customer and/or employee processes. This reduces customer loyalty and employee engagement. Would I ever buy insurance from the company that wasted hours of my time to accomplish a task that could have taken mere minutes online? Not a chance.
A good start is what I call a “friction audit,” and Sunstein calls a “sludge audit.” This involves looking for processes that can be simplified to benefit customers and employees without exposing the company to major risks. Sometimes, a fix may be as simple as eliminating an unnecessary rule or layer of management approval.
Other friction reduction may take more detailed analysis. Remediating a difficult ordering process, for example, likely won’t be quick or cheap. But, when leaders identify unnecessary effort as a serious problem, team members will be motivated to change. They are the ones who either experience the wasted effort themselves or deal with frustrated customers.
Start by asking your people where they or their customers are wasting effort – that alone should yield some quick wins. Those quick wins will get team buy-in and lead to more rapid progress.
