The ‘endowment effect’ is the well-known theory in behavioural economics that a sense of ownership makes a big difference to how we think and act. On a transactional level, it means that people will pay more to retain something they already own than to obtain something similar which is owned by someone else–even when there is no real cause for attachment. Put simply, a coffee cup becomes more valuable when it is my coffee cup.
Experiments demonstrate that such an endowment, or sense of ownership, can be established in just a few moments. Once it is, people cling on– and for economists, that is expressed in monetary value. So for those of us in the business of changing behaviour, how can we express the endowment effect in terms of performance, rather than pennies?
Firstly, on a large scale the endowment effect translates into long term emotional investment. This stuff is the glue which binds large communities together in the pursuit of common goals. It’s almost self-evident that once we have a certain store of feelings about a person or a group of people, it’s hard to let go.
And when an organisation can achieve the emotional investment of its employees – and it isn’t easy – they start acting funny. The sense of attachment means that, when faced with an unwelcome change or difficulty, they embrace it – they even become emotionally attached to the unwelcome change. Why? They’d rather keep a hold of the existing emotional stockpile than go out to hunt for a new one.
This means that the endowment effect is a hugely powerful tool, and it has big, if unexplored, implications for people development and talent practice. It demonstrates that a sense of ownership is at the heart of the engagement problem. When we say that learners are ‘hard-to-engage’, what we really mean is that we don’t know how to get learners to take ownership of new behaviours and learning outcomes.
‘Engagement’, then, is not about buckets of branding, messages from the MD and a snazzy design (although those can all help). It’s about the emotional nuts and bolts of the trainee / trainer relationship. Currently, the transaction taking place is the wrong way around.
The typical model is as follows: L&D produces training content, and the learner consumes that content. L&D is the marketplace and the learner is the customer. This is okay when your training product is an envied five day leadership course in the Swiss Alps that only the lucky few get to go on every year. But when you want to do something serious, like get thousands of people to become more mentally resilient to change, stress and disruption, or simply generate some buzz around compliance training, the product is less appealing.
The generational challenge to the LMS
So how about in the context of a learning platform? First, let’s remember that the greatest challenge facing the traditional LMS is not a technological challenge, it’s a generational one.
Generation Y is now entering middle management, and Generation Z is coming on stream. These learners are “digital natives” who innately relate to online environments in an emotional way. They don’t see a website as just a collection of content, but as a collection of experiences over which they feel a sense of ownership. This endowment effect is what makes Wikipedia, Facebook, Amazon or LinkedIn such “elastic” environments. Not all of us like these websites, of course, but what can their huge popularity teach us about building a more elastic learning experience on an LMS?
We’re already learning some of the lessons. For example, it’s more-or-less accepted now that for mature organisations, a well-stocked LMS should be a delightful bazaar of learning. Instead of content being ‘pushed’ at them (which sounds pretty unpleasant), users should get to ‘pull’ exactly what they want and mould it into a personal learning experience. Much like an e-learning version of Amazon. And most people love Amazon, right?
So why doesn’t a visit to your LMS feel as good as a visit to Amazon?
Firstly, there’s a lack of options and competition. Amazon, for example, offers me untold millions of great products. There’s dozens of sellers competing for market share in each category, guaranteeing that any taste will be satisfied. In comparison, the traditional LMS usually offers me one main library of generic content, plus a load of other bits and pieces. Really, L&D is the only ‘seller’ here.
But there’s something deeper which is broken, and it has more to do with what we are getting out of learners than what we are feeding in.
As people, learners are producers, above all else. Even when a human is ‘idling’ and not working in a job, he or she is still labouring in some way. Especially when we’re having fun, we’re often ‘producing’ something: whether that’s cooking a meal, writing a review or just texting a friend. (And when you think about it, even browsing the internet for several hours ‘produces’ useful data and a tiny dribble of ad revenue.)
From a different angle, then, a service like Amazon is similar to Facebook in that it is a very clever way to leverage unpaid human labour. The primary goal of its design may be to make you buy something, but that depends on the secondary goal: to make you contribute some of your own time (by producing a review, giving a rating, or just browsing). What they are leveraging is the endowment effect. The more time you spend on Amazon, the more of you it absorbs, and the more ‘sticky’ or elastic it becomes. Steve Wheeler points out that:
“The importance of the situatedness of learning at all levels cannot be overemphasised. Some of the strongest experiences and lessons we learn are rooted in authentic contexts, cultures and activities.”
It’s easy to forget, but what really makes Amazon valuable to us is the ‘situatedness’ of products on offer: the huge amount of user-generated information available is like an irresistible social wrapping paper. And it turns out that we are the very people who create that situatedness, a service which we provide for free. Clever, isn’t it?
This distinction is where the ‘marketplace’ model of learning management systems really falls down. Assume that your LMS is a place where only L&D ‘produces’, and the learner ‘consumes’, and it will fail to engage. Instead, we need to re-imagine the LMS as the ‘activist-LMS’. That means acknowledging that learning content experiences are basically non-engaging unless they are ‘situated’ and enriched by what I call ‘social-activators’.
Enter the Learning Experience Network
To do so requires that we combine the LMS with collaborative software and do so in an organic way. The LMS should be a place where formal learning content is enriched and situated by user-generated content by design, not by chance. Courses should function as a group of people, as well as a formal learning pathway.
The quality of the experiences that this group of people capture and create together should become primary to how we measure the effectiveness of any learning programme. Changed behaviour is, in fact, always original. It’s new behaviour or it’s not a change in behaviour at all. It is produced by and belongs to learners, or it doesn’t belong to anyone.
That means to achieve a genuine business impact, we have to end content monopolies and find ways to leverage and reward learner production like the rest of the internet does. In other words, we need to un-manage our learning management systems.
Learning management system is therefore no longer an appropriate phrase to describe what we want to achieve (of course, all it ever really described was the back-end administration and reporting). If we’re going to enact this kind of radical rebalance towards the learner as producer, then our vocabulary needs to change. Let’s view the LMS as what we really need it to be: a Learning Experience Network.
Toby is the creative lead and platform product manager at Saffron Interactive and an open source enthusiast. He likes it best when he is adding value to the elearning community, developing new thinking about how people development programmes and platforms can drive business performance and prove ROI.
Toby has extensive experience with learning management systems, a frenetic devotion to social media and consequently is able to keep a keen eye on best-practices in the ever-evolving world of elearning. His role at Saffron is to ensure that our team and our clients are continually developing best-of-class learning solutions.