Emotions and Decision-Making Processes in Management

What role do emotions play in the decision-making process where businesses are concerned?

Group decision-making continues to be of paramount importance to organizations, both large and small, but which emotions drive group members to work together and how do such emotions impact on the decisions made? In this research, over 100 managers from three multinational organizations, all of whom had been placed in an environment in which to make high-level managerial decisions, were studied to determine what were the influencing emotions that impacted on group dynamics and how such emotions contributed to the overall outcome.

Emotions are rarely studied in relation to group decision-making. Yet, in teams, a variety of emotions are evident and affect the decision-making process. Using data from 20 simulated companies run by a total of 106 managers attending executive education programs, the current research examined to what extent four classes of emotions - achievement, approach, resignation, and antagonistic - were related to team decision-making processes (alternative generation and alternative evaluation), and to team cohesion. Findings showed consistently over time that intense levels of achievement, approach, and antagonistic emotions were negatively related to group decision-making processes. Resignation emotions, which were not reported with high levels of intensity in this research, yielded a positive relationship with team cohesion.

Emotions affect decision-making processes and relationships among individuals: negotiating partners with a high anger level not only achieve fewer joint gains but also impact on the partners’ desire to work with each other in the future. However, anger is not the only emotion that decision-makers can experience. Despite recent efforts to study various forms of collective affect and their influence on organizational processes, very little empirical work has been done on collective emotion in relation to team decision-making processes. The purpose of my research was to address some of these identified gaps in organizational research and to examine the extent to which emotions are related to decision-making processes in management teams. I examined alternative generation, and alternative evaluation, and team cohesion - a group process by which members commit to team decisions while enjoying working with others.

The use of teams in organizations has become more prevalent as more and more strategic decisions require team decision-making, given the high stakes involved. Nevertheless, both advantages and disadvantages of team decision-making have to be considered. Decisions made by teams are thought to be advantageous for at least two reasons: the pooling of knowledge, expertise, and skills; and the commitment to the team and to its decisions (i.e. team cohesion). First, the pooling of knowledge, skills, and expertise is critical to the quality of decisions taken by teams. Second, it has been argued that team members have a greater propensity to support group decisions if they participated and are listened to, thus reinforcing the commitment to present and future decisions. These decisions, taken and accepted by all members, have a better chance of being successfully implemented.

However, the advantages may become disadvantages. The diversity of perspectives, skills, expertise, opinions, and status has to be integrated, which can lead to dissent, disagreement or conflict among team members. Although conflict in itself is presumed to help decision quality, it can be detrimental, especially if group members get involved in disputes which are taken personally. Team members are confronted with uncertainty and ambiguity, which can be a source of stress. In turn, stress and autocratic leadership in a highly cohesive group that feels invulnerable can provide antecedents for “groupthink” (i.e. defective decision-making). The group members favour unanimity above the realistic assessment of alternatives, thus suffering momentarily from a deterioration of mental efficiency, reality testing, and moral judgment.

Despite these possible drawbacks, group decision-making is considered as one of the more important aspects of group performance. The processes usually involved are gathering and sharing information, creating and identifying alternative courses of action, choosing among these alternatives by integrating the diverse perspectives of members, and implementing the decisions.

The particular focus of my research is strategic decision-making observed in a naturalistic decision-making framework. This is characterized by ill-structured problems, uncertainty, dynamism, the shifting of competing goals, time stress, high stakes, multiple players, and organizational goals and/or norms. A strategic decision is defined as an important decision that deals with complex and ambiguous issues and requires a significant commitment of resources from the organization. The complexity and ambiguity surrounding a strategic decision is usually too overwhelming for one person to deal with, thus strategic issues are often handled by top management teams. Interestingly enough, most of the 20 self-managed teams in the study selected an arbiter of their decisions who was most often called the CEO.

Two main decision-making processes were identified: (a) the generation of alternatives, which represents the more creativity-oriented process; and (b) the evaluation of alternatives, which represents the more analytical dimension of decision-making. One group process was selected, namely team cohesiveness, which contributes to the acceptance and commitment to the decision by all team members.

The participants of the study were 106 managers from three multinational organizations. They had been selected by their top management to take part in executive development seminars. A total of 20 nationalities were represented. Heterogeneous teams, which have been shown to make higher-quality decisions when dealing with non-routine, complex problems, were formed before the seminar started. Team members operated as a self-managed team, acting as a board of directors of the company they have to manage during the business simulation. This was a main learning component of the seminar, during which the decision-making processes were studied.

The business simulation used in the present research was designed to help participants see the integration of different functions and competencies necessary to run a multinational organization. It is a complex, large-scale simulation that requires complex decision-making strategies to deal with multiple inputs, unpredictable events and competing groups. Simulations have been identified as being efficient and pivotal in the development of managers, because they provide a viable and costeffective means to develop managers in realistic, but non-threatening situations. Participants reported their emotions at the beginning (B), middle (M) and end (E) of each decision period (see Figure 1).

Findings in my research systematically revealed that intense levels of achievement, approach and antagonistic emotions were negatively related to group decision-making processes consistently over time. More specifically, intense achievement emotions were negatively related to alternative evaluation. These results show that intense feelings of joy and pride (two examples of achievement emotions) may contribute to the good morale of team members but not make them more efficient and/or effective in their decisions. I observed during the simulation that some of the teams that tended to stay “high” on these achievement emotions demonstrated the characteristic behaviors of complacency and overconfidence typical of these emotions. In contrast, in the early phases of the simulation, during which it can be conjectured that momentum was built up, intense achievement emotions were positively associated with alternative evaluation. As time evolved the combination of an increased complexity of the task accompanied by high arousal (i.e. maximum intensity for the group consensus emotion) led to a negative relationship between achievement emotions and alternative evaluation.

The relationship between intense approach emotions and team cohesion, a team process, was negative. Approach emotions are expected to help sustain group activity as they reinforce links between people. Team members feeling approach emotions are mobilized to move forward, and are not only committed to the task, but also to work together. However, approach emotions can lead to dispersed attention or conversely to excessive focus, and to unrealistic goals. Thus, high intensity levels of approach emotions may lead to conflict of divergent objectives among team members, which in turn has a negative impact on team cohesion.

Resignation emotions were positively related to alternative generation. Fear (one example of a resignation emotion) enhances adaptation, as it helps individuals to be more perceptive to the useful signals provided by the environment and to take less risk. A mild degree of fear may actually be beneficial to alternative generation, as the team has to find new solutions and new ideas to improve their performance. The type of fear prevalent in this situation may be the fear to appear less competent than one’s peers. Shame and guilt (two other resignation emotions) also have behavioral consequences supporting these findings. Shame leads to improvement and encourages avoidance of incompetence; guilt contributes to constructive endeavors. These characteristics seem compatible with the activity of generating additional alternatives, in order to better cope with the increasing complexity of the decision-making task.

Antagonistic emotions were consistently negatively related to alternative evaluation. In the strategic decision-making literature, the dichotomy between cognitive conflict and affective conflict relies on the fact that anger leads to interpersonal conflict (or affective conflict), which in turn is detrimental to decision-making. Anger inhibits the process of considering all contradictory viewpoints and of making decisions.

Findings in the present research showed rather systematically that intense levels of emotion, regardless of its positive or negative nature, appeared detrimental to group decision-making processes, thus providing further support to the important body of literature that considers emotion as an inhibitor rather than a facilitator of decision-making. I propose that this research has begun to find curvilinear relationships between emotion and decision-making processes, that is a little fear helps, a lot of fear may not; a little pride helps, a lot of pride may not, etc.. There is no simple dichotomy between good and bad influences of affect/mood/emotion. The challenge remains in the future to study the influence of emotions on actual decision outcomes as it is probably one of the most frequently asked questions when it comes to real-life implications of this study.