| How We Really Make Decisions |
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By Susan Battley“The strong man is the one who is able to intercept at will the communication between the senses and the mind.” 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. Summary Emotions or mood states can cloud judgment and create powerful carryover effects that are often outside a person's conscious awareness. So, it may well be harder than you think to act in a truly rational way when it comes to management and business decisions. Leaders and managers cannot afford to allow emotion to dictate their business decisions, yet in many cases they may be unaware of their mood, let alone the influence it can subtly wield. To ensure that you make sound business decisions, you need to be conscious not just of your thinking processes but also of your underlying emotional state. Don't delude yourself by thinking you check your emotions at the door when you get to work. Your mood matters. It can be a critical factor, or a confounding variable that operates undetected. Remember too that your colleagues, constituents, customers, and competitors are prone to the same human tendencies. Copyright © Susan Battley, PsyD, PhD. All rights reserved. |
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