How much does it cost to do the right thing in a company? The internal market for behaviour

Behavioural economics teaches us that decisions do not depend solely on what we believe to be right, but also on the perceived cost of the alternatives. The same applies in organisations. When taking a risk involves a high cost and playing it safe is more cost-effective, there is no need to appeal to people’s courage: most people will choose the course of action that involves the lowest cost.

That is how silence creeps into meetings. Not because there is a lack of ideas, but because expressing them comes at too high a cost. This is how mistakes are concealed. Not because nobody wants to learn, but because admitting them carries a cost that outweighs the expected benefit. This is how dissent disappears. Not because everyone agrees, but because agreeing is more cost-effective.

From this perspective, psychological safety is the condition that reduces the cost of contribution. A safe place is not simply a place where there is a good working atmosphere and where well-being is fostered. In organisations with high levels of psychological safety, courage does not increase. Rather, where psychological safety is fostered, the price people have to pay for doing the right thing decreases.

That is why psychological safety is not the sole responsibility of human resources. It is the responsibility of management.

Every organisational decision affects the cost of behaviour: the way a leader responds to criticism, how a mistake is handled, who is rewarded, which questions are welcomed and which are ignored, and which conversations are allowed to continue and which are cut short.

In other words, management does not merely design processes, roles and objectives. It designs the internal market for behaviours. And every market produces what is in its own interest. If it is in one’s interest to remain silent, silence will prevail. If it is in one’s interest to conform, conformism will prevail. If it is in one’s interest to protect oneself, the organisation’s capacity to learn will diminish.

For years, we have been wondering how to get people to be more engaged, how to encourage greater collaboration, more initiative and more innovation, and how to reduce staff turnover. Perhaps, however, these are not qualities that should be expected solely of individuals, but rather the result of a well-designed internal market.

The question every leader should be asking is a different one: how much does it cost, within my organisation, to do the right thing?

Every organisation builds its own system of incentives. And, ultimately, most people do what the system makes it most convenient to do. When the cost of contributing outweighs that of self-preservation, people do not stop making an effort. They stop putting themselves on the line. And from that moment on, the organisation no longer elicits the behaviours it claims to value. It elicits those it makes most convenient.

*Organisational development consultant and author of *Don’t Die of Hierarchy* (Franco Angeli)