How We Really Make Decisions

By Susan Battley

“The strong man is the one who is able to intercept at will the communication between the senses and the mind.”
– Napoleon Bonaparte

Most executives like to think they check their emotions at the door before making business decisions. The idea that cool, rational analysis breeds better decisions is not new. Unfortunately, acting rationally is not as simple as it sounds.

Research in behavioral economics suggests that emotions have a way of affecting management and business decisions. Anger, in particular, can increase risky choices and behavior, thereby compromising your effectiveness and results at work.

Research by Gerben A. van Kleef suggests that anger can have a negative effect on negotiations. Angry people tend to yield more concessions in small deals with strangers. Anger can also poison negotiations in ongoing relationships by establishing long-term negative impressions and low satisfaction levels. The conclusions make intuitive sense.

Have you ever seen a patron at a retail store argue with a clerk over the price of a returned item? In many cases, the angry patron will simply accept the lower price and storm off rather than continue the argument. And when management and union representatives snipe at each other in the newspapers before the talks begin, you can expect difficult negotiations.

When research backs up intuition, executives should take note: Expressing anger may get you what you want in the short-term, but it can backfire by sabotaging long-term, ongoing relationships. In other words, bellicosity is a poor management technique and a high-risk approach to conducting business.

Social psychologists at Carnegie Mellon University have shown that people who are angry tend to make more optimistic risk estimates and lean toward choices that carry higher risk.  These investigators also examined fear and subsequent decisionmaking in unrelated situations. Unlike anger, which prompted more optimistic risk assessment and greater risk-taking, they discovered that the “fear factor” made people risk-averse and overly cautious in unrelated contexts.

In another study the researchers looked at two more emotions – sadness and disgust – and people’s subsequent buying and selling behavior.

People who felt sad or disgusted, they found, tended to allow these emotions to affect buying and selling decisions in an unrelated situation. Sadness elicited a desire to change circumstances. As a result, sad people were willing to pay more for items and sell them for less.

Disgust, on the other hand, caused people to want to get rid of what they had. They were willing to sell cheap, and they wouldn’t buy unless prices were very low.

Consider the implications of these findings for everything from impulse shopping and sales tactics to major business negotiations and transactions.

Copyright © Susan Battley, PsyD, PhD. All rights reserved.

About the Author

Susan Battley

An advisor to Fortune 100 executives and world-class institutions for more than twenty years, Dr. Susan Battley is an internationally recognized expert on CEO and leadership effectiveness. Her clients include Fortune 500 companies, professional service firms, and elite research institutions. She has worked with chief executives, university presidents, Nobel laureates, and prominent scientists, diplomats, and educators. A respected media source for analyzing leadership in the context of news-breaking events and key trends, Battley has been featured in outlets worldwide including CNN, CNBC, Fox, Bloomberg, and National Public Radio, and in The Wall Street Journal, The New York Times, The Washington Post, Chief Executive, Business Week, United Press International, Harvard Management Update, Entrepreneur, Science, Leader to Leader, Investments, and Worth. She is the founder and CEO of Battley Performance Consulting, a leadership strategy and organization effectiveness consultancy.