Let the “Tribal Leaders” Help Build Your 401(k) Participation


I’m an engineer by education…studied mechanical engineering at Kettering University. Like a lot of engineers, my natural inclination is to believe that if you build a better mousetrap, people will put it to use.

Despite my technical inclination and years of leveraging technology to improve processes and take humans out of harms way, one of my favorite classes was Behavioral Sociology…why do people react the way they do based on society’s norms and values? Without question, it’s the Behavioral Sociology class that has been most beneficial in launching Levanto Financial. On the surface, the services we provide and the results clients achieve should sell themselves…for example, we’re helping our clients save on average nearly $1,000 per month. Who wouldn’t want to do that?

Unfortunately, as a society, fiscal responsibility has never been seen as a status symbol. We are bombarded daily with advertising and marketing images imploring us to spend money. Buy this outfit, it will make you look slim…buy this car, you’ll be happier and it’s a ‘chick magnet’ …buy this iPad, iPhone, ipod and you will be connected and happy. We are a consumptive society and we revel in it.

When I graduated and landed the high-paid job, the first thing my peers discussed was “what kind of car did you buy?” Nobody said “Hey, my employer has an awesome 401 (k) match.” Why? Because fiscal responsibility is, well…it’s kinda boring.

But, there are implications for companies when their employees try to live the American Dream and keep up with the Joneses. Employees with financial struggles typically spend eight hours of their work week focused on their own issues. Rather than selling, serving customers, or developing a new and improved widget, they are figuring out how they can borrow from their 401(k) to pay off credit card debt, or make the mortgage payment on a house that was a little bit too much of a stretch. It keeps people from contributing to 401(k) or health spending account plans and it’s a huge drag on productivity.

So, what can an organization do about it? Here’s where my behavioral sociology comes in. Every company is a “tribe” if you will…its own society with its own norms, values, and its own informal leaders. It’s these informal leaders who hold the key to creating a culture where fiscal responsibility is healthy, desirable, and even “cool.”

Every department, every small group, has people who others look to for their opinions. A company can significantly impact employee participation in important financial planning options such as 401(k) or a company sponsored program such as the personal budget coaching that we provide. Learn who the informal influencers are…meet with them and impress upon them that they are looked up to within the company. Make sure they are participating, and get them to get others to participate. Don’t bribe them with expensive matching — rather, model the way with prudent, back to basic actions: create a budget and stick to it.

By getting the influencers within your organization to take a lead role, you can raise awareness of the importance of fiscal responsibility, increase the HSA and FSA contributions, and increase participation in the company 401(k) plan. Ultimately, this will be better for your employees and for your bottom line.