The Role of Emotions in Leadership Decisions

“Anyone can become angry – that is easy. But to become angry with the right person, to the right degree, at the right time, for the right purpose, and in the right way – that is not easy.” Aristotle, The Nicomachean Ethics, 330 BC

Aristotle was a student of Plato, and his primary disagreement with him was his respect for emotions. Unlike Plato, he realized that rationality wasn’t always in conflict with emotion. Instead, Aristotle argued that one of the critical functions of the rational soul was to make sure that emotions were intelligently applied to the real world.

Yet, we continually discount emotions when we weigh data, correlate statistics and use results from customer surveys and focus groups. Many companies rely on surveys and focus groups to make product and marketing decisions. Without careful consideration of context, they may miss making the best decisions.

More Brain “Flaws” in Making Decisions

This is a really good book if you’ve got the same interest as I in how the brain works to make decisions: How We Decide by Jonah Lehrer (Houghton Mifflin Harcourt, 2009).

Here’s what I’m learning about the duel between the rational brain and the emotional brain, and how it might apply to sales, business communications and influencing people…

There’s a flaw in our thinking habits called the framing effect, which is a part of decision biases called loss aversion. It explains why people are much more likely to buy meat when it’s labeled 85 percent lean instead of 15 percent fat. Also, why twice as many patients opt for surgery when told there’s an 80 percent chance of survival as opposed to a 20 percent chance of dying.

Neuroscientists hooked people up to an fMRI imaging machine to look at which parts of their brains lit up while making gambling decisions. Here was the gambling game they asked them to play:

Conscious Selling to the Unconscious Brain

To sell to someone, you have to persuade them. You have to influence their decision-making.

But don’t make the mistake of thinking the best way to persuade is to make a logical presentation. Scientists are continually learning how so much of what we think are conscious decisions have in fact been made out of our awareness.

Most behavior and decisions aren’t conscious. So, how can we influence unconscious brain processes? That seems like it would be almost impossible.

A look at books about the brain reveal that as humans, we evolved with three separate systems:

Dangerous Brain Flaws

Given the exorbitant interest rates charged by most credit card companies – like 25 percent or more – it’s surprising more people haven’t cut up their cards.

And yet, in 2006, consumers spent more than seventeen billion dollars in penalty fees alone on their credit cards. Since 2002, Americans have had a negative savings rate, which means we’re spending more than we earn.

The Federal Reserve recently concluded that this negative savings rate was largely a consequence of credit card debt. We spend so much money on interest payments that we can’t save for retirement.

At first, such behavior makes no sense. But then, according to what I’m reading about decision-making and the brain, it’s obvious that credit card companies take advantage of a dangerous flaw built into our brains. And awareness can probably help prevent falling prey to it.

When Value Attributions Go Wrong

A common decision mistake is to assign a value based on first impressions or someone else’s recommendation.

Value Attribution is a good example of the kinds of things that lead to faulty decision making. This involves judgment and decisions we make upon first impressions. The example I use here was a field experiment run by The Washington Post.

In 2007, Joshua Bell, one of the finest violinists alive, took out a $3.5 million Stradivarius and started playing a difficult piece at an underground subway station. He was wearing a baseball cap and jeans. Except for one person who recognized him, people went about their hurried lives. A few people stopped, but there was no applause and for the most part his performance was disregarded as that of a street performer.

Perhaps the commuters were in  too much of a hurry to pay attention to Bell. As they passed, most subway riders didn’t even glance in his direction. Although his performances regularly command high tickets with the best orchestras, people dismissed it as street music.

The Irrationality of Our Lives

I’m reading books right now about how we make decisions and how irrational we can be. I’ll share them with you here, and suggest you find time to read them. They are easy reads because, unlike many business books, they are full of  examples that make the ideas come alive with real world stories.

• Predictably Irrational by Dan Ariely
• Sway, the Irresistible Pull of Irrational Behavior by Ori and Rom Brafman
• How We Decide by Jonah Lehrer

There’s some interesting research being done on decisions in the field of behavioral economics, which is a merge of psychology and business thinking. Apparently, we do not make decisions as logically as previously predicted by traditional economists.

In fact, we are predictably irrational when it comes to buying, investing, gambling, and goal setting. We make the same errors over again. The people who do experiments even have names for some of our common mistakes in judgments:

• Negativity bias
• Loss aversion
• Arbitrary coherence
• Value attribution

Could it be that our decisions and goals have been carefully crafted based on erroneous input? Have we made arbitrary decisions at some point in the past assuming they were wise, not knowing they were based on faulty thinking? And then have we stuck with those goals because we want to remain coherent to our plan?

Without engaging in self-doubt to the point of inertia, I think a certain amount of introspection is worthy once in a while. At least when we become aware of these vulnerabilities, we can avoid making even bigger mistakes.

The Drive to Achieve and Executive Pay

As far back as 1993, federal securities regulators forced companies for the first time to reveal details about the pay and perks of their top executives. The reasoning was that once pay was out in the open, boards would be more cautious about outrageous salaries and benefits.

They were trying to stop the tide of rising executive compensations. In 1976 the average CEO was paid 36 times as much as the average worker. By 1993, the average CEO was paid 131 times as much.

Fast forward to today and the average CEO makes about 369 times as much as the average worker. This is three times as much as before regulators decided that executive compensation had to be public.

What happened? Their decision to make salaries public, thinking it would stop the steep rise in executive salaries, backfired.Instead of stopping them, it caused even more increases.

Apparently we are competitive beasts, and the drive to make more than our peers motivates us to seek higher salaries and thus more prestige. Knowing what someone else is making, spurs us on to seek more.

Emotions vs Rational Logic: Which Comes First?

I’m reading an interesting book by Jonah Lehrer, How We Decide. It’s surprising, for sure. Here’s what I’m learning…

In 2002, the Nobel Prize for economics was awarded to psychology professor, Daniel Kahneman, whose studies proved behyond any doubt that we behave emotionally first, rationally second.

Kahneman’s Prospect Theory and the work he did with Amos Tversky on judgment and decision-making have revolutionized the way we see people make decisions, and how we see leaders fail to guide companies with good judgment.

Deal or No Deal is a popular TV game show that  shows dramatic evidence of the role of emotions in making decisions. It’s entertaining because the vast majority of contestants don’t make decisions based on mathematical probabilities. And we can see their folly, their arrogance, or their cautiousness manifest itself.

How Hiring Decisions Go Wrong…

Can we trust our instant impressions and snap decisions?

My interest was sparked this week by a report from Anderson Cooper on CNN. Researchers are doing studies on young children and racial biases. It’s interesting because children of very young ages and of all races and ethnic mixtures are indicating they believe that lighter skin has more positive associations than darker tones.

And this bias was showing up in darker skinned children as well. No one’s speculating yet as to the origins of such beliefs or what the sources could be.

Which reminds me of a chapter in Blink, the Malcolm Gladwell’s book about first impressions. Thirty years ago there were very few women hired as musicians in national philharmonic orchestras.

A strange series of events led to a woman being hired as a trombone player for the Munich Philharmonic Orchestra after she auditioned behind a screen. Her performance was judged superior by far. They didn’t know she was a woman.

Snap Decisions: the Wisdom of the Unconscious

How do you make decisions? Quickly? Intuitively? Carefully, after studying all the options?

We live in a culture that values cautious decision-making. At least in the business circles I work in, everyone assumes that the quality of a decision is directly related to the time and effort that goes into making it.

But psychologists and brain scientists tell us otherwise: conscious decisions are often made unconsciously based on emotional instincts that occur in a flash. It’s what Malcolm Gladwell writes about in his book Blink.

In another example, Timothy D. Wilson writes in his book Strangers to Ourselves, “The mind operates most efficiently by relegating a good deal of high-level, sophisticated thinking to the unconscious, just as a modern jetliner is able to fly on automatic pilot with little or no input from the human ‘conscious’ pilot.