Friction costs your business more than you will ever imagine
Friction costs your business more than you will ever imagine
When I think about the things that our clients want to do, I wonder if there are ways that we can make life easier for them by taking out friction.
November 16, 2017

By Ross Martin, Accountancy Director at Hive Business.

In the film Equilibrium, a regime in the future has ruthlessly crushed freedom of thought. Citizens must take their daily dose of Prozium to banish emotions and stay obedient, otherwise Christian Bale will kill them on behalf of the government.

The film’s a bit nutty and adds more celluloid to a hackneyed genre, but I mention it because obedience and conformity are on my mind. Authoritarian and politically correct rhetoric has the wind in its sails at the moment, and meanwhile the authorities continue to pull on a powerful set of psychological tools to get citizens to behave in “better” ways.

Admittedly, many of these are pretty cool, such as the idea to redesign hospital patient charts so doctors stop killing people with their bad handwriting. Now they have to enter letters and numbers into individual boxes. In one trial the frequency of medications entered correctly rose from 10% to more than 90%.

Since 2008 behavioural scientists have been enjoying influence at the heart of government. I’ve mentioned my unease about this before, which probably stems from my awe for behavioural economics. It has breath taking power but, you have to wonder, who gets to decide how to use it?

I can see, for example, that the decision to make pensions opt-out rather than opt-in has been well received by workers. Only about 10% have opted out, and even these people are happy with the new system. But I suspect the presentation of auto-enrolment as a social good might lose its lustre when the time comes to remove the state pension altogether.

Such nudge tactics have huge potential to help you as a business owner. One of the key concepts is “simplify, reduce hassle and take out friction”. I take the phrase from the book Inside The Nudge Unit: How Small Changes Can Make A Big Difference. (It’s written by David Halpern, the guy who brought behavioural economics into the coalition government. His friend Richard Thaler, who did the same over the pond, won the Nobel Prize in Economics 2017.)

Here’s how friction works. Suicides dropped by 30% out of the blue in the 60s. Then someone realised the switch to North Sea gas, which has less carbon monoxide, meant the popular head-in-the-oven approach no longer worked. Later, when we introduced limits on the paracetamol individuals can buy in one go, there was a 42% reduction in deaths from this method, even though there’s nothing stopping the determined buyer from going into several shops in a row and buying many more pills. Except friction.

If you can remove some friction from your patient journey, even if it’s a single click, you should bend over backwards to do it. When HMRC sent an email with a link taking people directly to a form, rather than to a page with the form on it, it saw a 22% rise in form filling.

People are happy to pay more money to avoid friction. We’re seeing this on a massive scale with pension auto-enrolment, where workers could easily transfer to better products but don’t. Of course, these are the same people who never got round to setting up a pension in the first place, leaving the contributions they were entitled to as “money on the table”.

When we have a million things to do, the stuff with hassle attached gets pushed to the back of the queue again and again. That’s why we put off things we know we should do — things we actually want to do and believe are important.

When I think about the things that our clients want to do, I wonder if there are ways that we can make life easier for them by taking out friction. I’m going to be reflecting on that.

Meanwhile, I hope the authorities will realise that the nefarious use of nudge tactics, by which I mean using them to manipulate people into doing things they are not legally obliged to do, such as paying the same amount of tax as everyone else or buying a TV licence they don’t need, will eventually backfire. Like they do in Equilibrium when Christian Bale forgets to take his Prozium.

If you would like to find out how you can remove friction from your business get in touch on 01872 300232 or email us at hello@hivebusiness.co.uk.

The information contained in this article is based on the opinion of Hive Business and does not constitute formal tax advice. Any tax outcomes will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future. You should seek specific advice before embarking on any course of action. Hive Business does not provide regulated Financial Advice, including advice on investment, insurance or lending products or their suitability for you. This article is provided for information only and does not constitute, and should not be interpreted as, investment advice or a recommendation to buy, sell or otherwise transact, or not transact, in any investment including Bitcoin and other crypto. Any use you wish to make of any information contained within this article is, therefore, entirely at your own risk.

By Ross Martin Group Chairman
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