Emotions Play Role in Decision-Making

News Updates

Feelings take precedence in decision-making for senior business leaders, according to a study on emotions and business. Researchers also discovered that executives believe values, company culture and reputation are just as important as big data when it comes to making decisions.

More than 700 senior business executives—88 percent of whom had director-level titles or higher—were queried in Only Human: The Emotional Logic of Business Decisions, a report released July 15, 2014, by The Fortune Knowledge Group in collaboration with the global advertising agency gyro.

“With more information comes more complexity,” stated Jed Hartman, group publisher of FortuneMoney and Time magazines, who also oversees The Fortune Knowledge Group, in a news release about the findings. “Business decision-makers are, of course, using data to their benefit. However, when looking to select a business partner, it is clear that emotion plays a vital role. Decision-makers do not just want a partner who looks good on paper. They want to create a relationship that can lead to a successful, long-term partnership. As with any relationship, aspects like values, reputation, trust and emotion come to the forefront.”

Data shouldn’t be discounted, however.

In a 2012 article in HR Magazine, Edward E. Lawler III, director of the Center for Effective Organizations in the Marshall School of Business at the University of Southern California, and John W. Boudreau, a professor at the Marshall School and research director at the center, wrote, “Most business managers have increased their awareness of the importance of human capital, and of their role in nurturing and deploying it. HR data and scorecards are more available, providing a basis for improved decisions.”

Even when data is available and used, emotions and instinct figure largely in decision-making.

“Business decisions are made emotionally and justified rationally,” said Christoph Becker, chief executive officer of gyro, in a news release. “A side effect of the tsunami of digital content is, too often, there is an utter lack of human relevance. That is why if you truly want to connect with business decision-makers, you must make them feel..”

Key findings, according to a release from the Fortune Knowledge Group, include:

  •     Human factors play a key component in decision-making. Sixty-five percent of executives surveyed said “subjective factors that can’t be quantified (including company culture and corporate values) increasingly make a difference when evaluating competing proposals.”
  •     Executives “trust their gut.” About 62 percent said they rely on instinct when making crucial decisions.
  •     Solid reputations and cultures prevail. When selecting an organization to do business with, 70 percent of those polled said reputation was the most influential reason; 53 percent cited company culture as a contributing factor.
  •     Emotional insight is required for analytical awareness. Sixty-one percent of senior business leaders concurred that when making decisions, human perceptions should come before solid analytics.
  •     Negative risks are outweighed by positive rewards. Most executives (68 percent) said admiration, ambition and potential gains far overshadow anxieties about failing and suffering the blame for bad decisions.
  •     Permanent alliances are the aim. Seventy-one percent of respondents said the long-term gains are worth the temporary financial risks.

Aliah D. Wright is an online editor/manager for SHRM.

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