For better decisions
In recent months, clients have increasingly told us that many employees lack foundational knowledge. As a communications agency specializing in HR topics, we support our clients in successfully carrying out Total Rewards projects. And in the end, one thing remains true— We bring people together and foster understanding.
Knowledge is essential for this, also in the field of financial wellbeing. Self-responsibility and self-confidence support us in gaining the knowledge we need.
This is called self-efficacy, our topic today.
We are beginning to doubt that the current, deeply caring attitude towards employees is the right way to develop the workforce in our rapidly changing world. Now, companies cannot replace the state or families as educators. This is neither possible nor sensible, but, as Wilhelm Busch said, “if you want to get on the right path, you may well have to go through yourself”. What does that mean?
We cannot retrospectively influence socialization by the family or school in adult employees. But companies can do something – and we call this ‘self-efficacy’.
Numerous studies have shown that self-efficacy has positive effects on the performance, satisfaction, health, and well-being of individuals and groups.
Self-efficacy and personal responsibility
The American psychologist Albert Bandura coined the term self-efficacy, which describes a person’s conviction that they can successfully overcome difficult situations and challenges on their own. Bandura identified four sources from which self-efficacy arises:
- Mastery Experiences (a sense of achievement)
- Social Modeling (witnessing other people’s accomplishments)
- Social Persuasion (verbal encouragement)
- Psychological Responses (emotional regulation)
He developed various methods to measure and promote self-efficacy, for example, through self-observation, goal setting, self-reinforcement, and self-instruction.
This concept is applied in many areas with great success. Since it is not purpose-driven, but instead serves to empower people, the risk of manipulation is reasonably low. Ultimately, the more important goal is for people to take responsibility for their own actions—or to enable them to do so.
However, I can only take on responsibility if I am convinced that I can handle it. And I can only do that if I believe in my own abilities and skills. Any unrealistic expectations shatter in the face of everyday life
Self-efficacy and financial well-being
The labor market is primarily about the exchange of services for money. And as Unequity deals with topics surrounding Total Rewards systems, it’s a logical focus for our work.
A few years ago, we took a close look at the topic of financial education, focusing on financial well-being as a benefits trend (see link at the end of the article). Fortunately, financial well-being is now part of the standard benefits services for some of our customers. Or let’s be more precise— We are talking about financial literacy, as a solid basic knowledge of finances that enables us to manage our financial resources responsibly.
Companies that offer employee share ownership, company pension schemes or insurance as benefits have a particular interest in ensuring that participants have a basic financial knowledge. However, as companies may not and should not provide personal advice, a professional financial education program is ideal for imparting knowledge to help employees make good decisions. Which, in turn, adds to strengthening the employees’ self-efficacy.
According to the OECD, financial literacy is “a combination of awareness, knowledge, skill, attitude and behavior necessary to make sound financial decisions and ultimately achieve individual financial well-being.” This includes a basic understanding of money, its meaning and possible uses, as well as basic knowledge of personal budgeting. The next step deals with the financial sector itself—the banking system, the capital market, and the associated risks and opportunities.
At Unequity, we want to help companies ensure that sound financial knowledge is communicated and disseminated through internal channels and media. We use our expertise and years of experience in using internal corporate channels to communicate complex topics to the various internal target groups in an attractive and simple way— Understanding your own salary, learning to assess the value of benefits, and being able to evaluate the risks and opportunities of investments. We communicate with passion and convey enormous added value for employees and companies— knowledge.
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