By Robert Hogan and Adrian Furnham
Head or heart, logic or passion, cold reason or gut instinct—which is the optimal decision-making strategy of a great leader?
It’s no surprise that, over the years, much effort has been invested in analysing the decision-making processes of great leaders. Are they all geniuses in evidence-based reasoning, or do they typically go with their intuition? Here, Robert Hogan of Hogan Assessments and Adrian Furnham of BI Norwegian Business School find that, as so often, the truth lies somewhere in the middle—of a broad spectrum of personality.
What has 100 years of psychological research taught us about decision making? There is a vast literature on this topic but we shall be selective, looking at it through the eyes of personality psychologists. We are particularly interested in the decision making of business leaders.
A Few Points
- Irrational and a-rational: People are poor at making decisions. Amos Tversky and Daniel Kahneman used a series of imaginative experiments to show that people’s everyday decision making is surprisingly biased. Their research challenged the assumption of mainstream economics that decision making is rational, and for this demonstration Kahneman received the Nobel Prize in Economics. Their findings are consistent with Sigmund Freud’s view that people are fundamentally irrational but skilled at providing “rationalizations” for their decisions. The myth of the cold, logical, rational, business leader has been exposed as such—a myth.
- Hierarchical decision making. Leadership research primarily focuses on team leaders—coaches, junior officers, and business unit managers. Teams and work groups are where the work of organizations gets done and, at this first hierarchical level, successful leadership depends on building relationships with individual team members one at a time. But it is useful to distinguish three levels of leadership, each with distinctive demands. The first level of leadership concerns building and maintaining high-performing teams. The second level is middle management and concerns helping multiple teams understand and implement the decisions of top management. At the middle level, the critical skill is diplomacy, mediating between the demands of senior management and the resistance of the workforce. Top management is the third level and is about decision making and goal-setting—what to do and who to put in charge of doing it.
- The Apple Paradox. Steven Jobs, the creator of Apple, a hugely successful technology firm, was also a very “unpleasant” person. The same is true for William Gates of Microsoft, Jeff Bezos of Amazon, and Elon Musk of Space X (and Henry Ford, J.D. Rockefeller, Thomas Edison, et al.). The Apple Paradox concerns how such disagreeable people were able to build such successful enterprises. The answer is that very successful entrepreneurs are not better leaders than their competitors; rather, they consistently make better decisions. Decision making at the top of organizations is vastly consequential, some people are better at it than others, and the topic merits closer inspection.
Common Themes in Decision Making
Based on our reading of military and business history and our experience as working adults, we think four decision-making themes occur repeatedly. There are surely more than four dimensions of decision making, but these four are clearly important and merit further study. They are as follows: (1) planning vs. improvisation; (2) reward seeking vs. loss avoidance; (3) valuing expertise and evidence vs. valuing intuition; and (4) reactions to bad decisions.
Planning. Mike Tyson, the former heavyweight boxing champion, famously observed that “Everyone has a plan until they get punched in the face.” Nonetheless, Napoleon Bonaparte (possibly the most successful general in history) and Dwight Eisenhower were famous for their planning ability. Eisenhower also famously remarked that “Plans are nothing, but planning is everything.”
Most people vary along a dimension of planning vs. spontaneity. Aesop’s fable of the grasshopper and the ant is often interpreted as illustrating the difference between artists, who live for the moment, and farmers, who plan for the winter. Henry James, the greatest American novelist, planned his career like a military campaign. So, the distinction is not about artists vs. farmers but is about more vs. less successful people. Our point, however, is that people’s decision making can be organized along a dimension ranging from being planful at one end to following a dream at the other extreme.
Reward seeking vs. loss avoidance. Some people base their decisions on estimates of positive pay-offs and others make decisions so as to minimize their losses. It is tempting to interpret reward seeking as a sign of optimism and loss avoidance as a function of pessimism, but that would be a mistake. For example, reward seeking could be related to fear of missing out (FOMO), and loss avoidance could be related to prudence—wanting not to make unnecessary mistakes. Moreover, because 50 per cent of all business decisions are wrong, both tendencies are equally valid. We are reminded of Pericles’ speech midway through the Peloponnesian War: “I care less about the Spartans’ strategy and more about our own mistakes.” Similarly, game theory dictates that, if you have the weaker position (as Pericles did), then the optimal strategy is to avoid making mistakes. Nonetheless, we suspect there are consistent individual differences in reward seeking vs. loss avoidance. When Ronald Reagan was asked what his policy would be for dealing with the Russians, he said “It is simple; we win and they lose.”
Expertise vs. intuition. Consider the following quotes from a master statesman, from the original American hippie, and from the last universal genius of western civilization. All three concern the role of intuition vs. data in decision making:
- Otto von Bismarck: “Only a fool learns from experience. I prefer to learn from the experience of others.”
- Ralph Waldo Emerson: “Trust the instinct to the end, though you can render no reason.”
- David Hume: “Reason is and ought only to be the slave of the passions.”
Bismarck believed that expertise is the proper guide to decision making. Emerson believed in intuition. And the wily David Hume split the difference; reason is an essential guide, but passion provides the actual impulse to action. As to which view is the best, history provides no clear answers, because real-world outcomes are so unpredictable. George Bush, 43rd President of the US, famously “trusted his instincts” and used them to blunder into a disastrous and inconclusive war with Iraq. In contrast, John F. Kennedy, 35th President of the US, relied on the best minds of the US military, the CIA, and the State Department to launch a failed invasion of Cuba, after which he woefully observed that he had always known better than to trust the advice of experts. Our point is that people vary on a dimension of decision making defined by reliance on intuition and instinct at one end, and evidence, logic, and expert opinion at the other. One is associated with impulsiveness and flexibility, the other is associated with paralysis by analysis.
Reactions to failure. In the 1950s, Saul Rosenzweig, a psychoanalyst who studied reactions to failure, proposed sorting the reactions into three categories: (1) Intropunitive—blame self for mistaken decisions; (2) Extrapunitive—blame others for mistaken decisions; (3) Impunitive—don’t react to the fact that a mistake was made. All three tendencies have their strengths and weaknesses. Intropunitive people can be coached and can learn from their mistakes, but they may also be guilt-prone and slow to make decisions. Extrapunitive people can be arrogant and unable to learn from experience but make decisions quickly and with confidence. Impunitive people, like star athletes, simply note their mistakes and get back to business—never complain and never explain, just move on.
Personality and Decision Making
Personality must impact decision making. How and in what ways is an interesting research topic. We all know from personal experience the impulsive extrovert who makes rash, unthought-through decisions. We all know the anxious person low on adjustment who seems incapable of making the simplest decisions.
But we have long been interested in the dark side of personality and how these people characteristically make decisions.
Personality must impact decision making. How and in what ways is an interesting research topic.
Here, we speculate on some possible links. Specifically, people with elevated scores on the scales of the Hogan Development Survey (HDS) will react to feedback that they have made mistakes in characteristic ways. The following list outlines some possible tendencies:
- Excitable. Fueled by a sense of urgency and being on high alert for possible threats, these people tend to jump to conclusions and make hasty decisions designed to make problems go away. When confronted with mistakes, they project blame outward in a diffuse manner, on whatever external targets are available—bad rules, insubordinate staff, etc.
- Cautious. Concerned about being criticized for mistakes, these people are risk-averse and, therefore, slow, even reluctant, to make decisions, and their decisions are designed to minimize costs rather than maximize rewards. When confronted with a mistake, they become even more cautious and reluctant to make decisions.
- Skeptical. Alert for signs of threat and betrayal, these people make decisions designed to protect them from, and to send a message to, potential aggressors. When confronted with mistakes, they blame them on their real and imagined enemies.
- Reserved. These people make decisions based solely on business considerations, with no concern about how they will impact people and morale. When confronted with a mistake, they perceive it as an attack, but they suppress their anger, withdraw, and ignore feedback.
- Leisurely. Feeling put-upon and resenting being told what to do, these people make decisions for which they can’t be blamed when they go wrong. When confronted with a mistake, they blame it on the person who told them to do it, usually a superior, and refuse to take any responsibility.
- Bold. Overestimating their strengths and underestimating the challenges, these people make high-risk decisions intended to enhance their status and prestige. When confronted with a mistake, they spin and refuse to acknowledge or take responsibility for the mistake.
- Mischievous. Focused on their own agendas and believing that others will always forgive them, these people make decisions that cut corners, test limits, and / or even flaunt the rules. When confronted with a mistake, they won’t acknowledge it; using lawyerly logic and verbal legerdemain, they deny all responsibility.
- Colorful. Believing that others find them fascinating and attractive, these people make decisions designed to attract attention and create a buzz about themselves. When confronted with mistakes, they simply refuse to acknowledge their existence; they expect others to accept their mistakes as part of their charm.
- Imaginative. These people believe that others are fascinated by their quirky, creative, and unusual ideas, and they make decisions that are designed to amaze and entertain others, not fix issues. When confronted with mistakes, they are surprised that others don’t understand them and explain their mistakes in terms that no one understands.
- Diligent. These people are serious, concrete, and practical, and they make decisions that provide short-term, focused solutions to problems, but tend to ignore the big picture. When confronted with a mistake, they feel guilty, blame themselves, work harder, and focus even more closely on details.
- Dutiful. These people are eager to seem loyal and make decisions that they believe authority figures will like, rather than decisions that actually solve problems. When confronted with a mistake, they feel guilty, blame themselves, and work even harder to please authority.
So…
Successful leaders in all spheres are characterized, in part, through making smarter decisions. It is a skill which can be learnt but is heavily influenced by personality. We have observed how a person’s dark-side personality can powerfully influence their decision-making style. Hence we suggest that, when appointing or promoting people to senior positions, their personality should be carefully assessed.
About the Authors
Robert Hogan is the President of Hogan Assessments. He has spent his entire life trying to understand the reasons why some leaders succeed and fail.
