Leaders Make Best Decisions When They Don't Have To
Giving business leaders the freedom to solve problems on their own, without being pressured into making a decision , sets them up best for success, new research shows.
A study by researchers at Canada's University of Guelph and University of Waterloo found that business leaders tend to pick riskier options when forced to choose between competing alternatives to complex situations. However, when given the option not to choose either, managers tend to reflect more and pick the solution with fewer negative consequences.
"One of the most powerful tools to combat high-risk or unethical decision-making may simply be offering managers the option not to choose," said Guelph professor Theodore Noseworthy, a co-author of the study.
The professors' research focused on how psychological distance plays a role in business leaders' decision-making process. A survey of experienced managers found that business leaders were more likely to risk the unethical consequences of a decision when they felt a detachment from the stakeholders – such as when they knew their decision would take effect only in the distant future or would affect a different social group.
"Increased psychological distance can lead to managers overlooking the ethical consequences of an outcome," Noseworthy said.
In a second survey, 192 different managers were asked to make decisions under "high" and "low" psychological distance, but this time forced to choose between competing solutions or given the option to reject both alternatives.
The researchers found that, as with the first experiment, the majority opted for the higher-risk choice when they were more psychologically removed from the situation. However, when given the option not to choose, managers spent more time reflecting and opted for the less risky solution.
"Where this gets interesting is why this happens," Noseworthy said. "Managers were more likely to see the potential ethical consequences of their actions when they are given the option not to choose."
Noseworthy said the study is the first of its kind to find a rising risk in unethical decisions because the global economy is expanding, increasing the psychological distance between the decision-maker and those affected by the decision.
The study, which was recently published in the Journal of Business Ethics, was co-authored by Guelph professor Scott Colwell and professor Michael O. Wood of Waterloo's School of Environment, Enterprise and Development.