Pay or nudge employees into change? A theoretical and experimental investigation of the effect of nudging for organizational change

Abstract

Organizational change often fails due to employees' resistance to change resulting in unforeseen expenses, delays, or other disruptions in organizations. In our experiment, we compare behavioral interventions—a pro-change default rule and a pro-change recommendation—with a costly pay raise to foster supportive behavior. In regard to the pure nudge used (default), we support its effectiveness in enhancing change-related success. In line with our model and based on the assumption of low decision confidence in change settings, we find that a preference nudge (recommendation) lacks a corresponding effect. In addition, we find that a pay raise has a positive effect that is likely to be triggered by positive reciprocity. If this pay raise fails to materialize, we report supporting evidence for negative reciprocity. We compare the effect sizes for these nudges and the pay raise and provide insights for the relative cost-effectiveness of such nudges compared to a pay raise for organizational change. We conclude with managerial implications.