Emotions in Decision Making: Why Rational Thinking Alone Fails in Strategic Decisions

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Summary

Historically, decision-making was seen as a purely rational process, with emotions considered detrimental to achieving optimal results. Philosophers like Aristotle and Plato emphasized rationality as the defining human trait. However, recent research has shown that emotions are integral to organizational and strategic decision-making. Emotions, which are distinct from moods, influence judgment and persist beyond the moment of decision, shaping future choices and consistency. The complexity of strategic decisions brings about emotional responses, which serve as motivators and guide decision-makers. Studies have identified both immediate and anticipated emotions throughout these processes. Contemporary research challenges the traditional notion that emotions disrupt rationality; instead, emotions are now recognized as essential contributors to sound judgments. Neuropsychological evidence further demonstrates that the absence of emotional input impairs decision quality, even if rational skills remain intact. Ultimately, emotions and rationality are intertwined, each playing a crucial role in effective decision-making within organizations.

Traditionally, decision-making is regarded as a rational process wherein reasoning controls the ruling process, enabling organizations to achieve optimum results (Markič 2009). The notion of the rationality of decision-making dominated early arguments, which viewed emotions in a negative light, hindering the rational process of attaining the best outcome. Dating back in human history, the great philosopher Aristotle is believed to be the first to assert the connection between rationality and decision-making. Then, there is Plato, who viewed humans as rational animals and posited that rational decision-making is what separates humans from other creatures (Depew 1995; Markič 2009; Secchi 2010). Recent research reveals, however, that emotions play an integral role in organizational affairs and are essential components in dealing with complex situations (Forgas & George 2001).

Andrade & Ariely (2009, p. 7) define emotions as “specific (e.g., anger, happiness, fear, etc.) and brief subjective feelings, which usually have an identifiable cause (e.g., I’m angry with…).” They are “affective responses to what happens in the environment and cognitive representations of the event’s meaning for the individual” (Frijda & Mesquita 1994, p. 51). Emotions occur “when an event is appraised by the individual as relevant to his or her concerns” (Frijda & Mesquita 1994, p. 52). They are different from moods, which are “usually more diffuse (e.g. good or bad mood) and weaker feeling states, and tend to lack source identification” (Andrade & Ariely 2009, p. 7). Affect or feelings encompass both moods and emotions. Despite their conceptual distinctions, they do influence one’s judgment and decision-making to a certain extent; henceforth, this article will use the term “emotion” to refer to such a driving force (Andrade & Ariely 2009; Kitayama & Markus 1994).

The influence of emotions on decisions is something to which everyone can relate. As much as emotions impact decisions, the contrary also holds true – the outcome of decisions can influence one’s emotions (Schwarz 2000). This bi-directional effect means the impact of emotions on decision-making lasts longer than the emotional state at the time the decision is made. Though emotions are short-lived, decisions made based on feelings can serve as a basis for future decisions (Andrade & Ariely 2009). This is fundamental to the cognitive process in which people tend to recall and use prior information to influence consistency in decision-making (Andrade & Ariely 2009; Forgas & George 2001). Organizational decisions, such as those in strategic decision-making, typically involve many decision and judgment points. The complexity of the process triggers, both consciously and subconsciously, emotional responses among the participants, albeit at varying levels. These emotions are essential motivators in strategic decision-making (Neumann 2017). As Kemp et al. (2018) found in their study of organizational decision-making in the buying process, emotions are present at all its phases. Loewenstein & Lerner (2003) go so far as to identify the types of emotions along the process. They categorize two kinds of emotions – immediate and anticipated. Immediate emotions are those actually experienced at the time the decision is made. On the other hand, anticipated emotions are the feelings expected when the results are known.

In the traditional approach, behavioral decision-making is viewed as a cognitive process that does not necessarily involve emotions, suggesting that emotions irrationally disturb what should be a rational and non-emotional cognitive process (Pfister & Böhm 2008). However, recent research in strategic management is shifting toward the belief that decisions are not devoid of emotions (Neumann 2017). Emotions are omnipresent in helping shape sound decision-making (Pfister & Böhm 2008). The investigation by Kemp et al. (2018) into selling organizations yielded results challenging the prior assumptions that organizational decision-making is mainly a rational process. Lerner & Keltner (2000) demonstrated the effects of different emotions on risk judgements. Forgas & George (2001) theorize that emotions are essential elements of social life and organizational behavior. LeDoux (1998, p. 35) recognized that “cognition is not as logical as it was once thought, and emotions are not always so illogical.” In neuropsychological research, studies reveal that emotions are vital in making adaptive decisions. Individuals who have damage to the ventromedial prefrontal cortex impeding their emotional state, though their rational and logical skills were unimpaired, have consistently made poor decisions and judgments, even in simple interactions with others (Adolphs & Damasio 2001).

The success of organizations hinges on the ability to make effective and sound judgments and decisions. Strategic decision-making is a complex process. The importance of the outcomes of such decisions to the lives of individuals and organizations cannot be overstated. The complexity of the process is enough to trigger emotional reactions of varying degrees in those involved. The role of emotions in the cognitive process of decision-making cannot be neglected (Forgas & George 2001). Emotions are part of the decision-making process. They do not threaten rationality; rather, they are essential in decision-making. Emotions assist people in making better judgments and decisions through appropriate appraisals and the formation of feelings, such as fearing what is rightly to be feared (Pfister & Böhm 2008).

References

Adolphs, R. & Damasio, A.R. 2001, ‘The interaction of affect and cognition: A neurobiological perspective’.

Andrade, E.B. & Ariely, D. 2009, ‘The enduring impact of transient emotions on decision making’, Organizational Behavior and Human Decision Processes, vol. 109, no. 1, pp. 1-8.

Depew, D.J. 1995, ‘Humans and Other Political Animals in Aristotle’s” History of Animals”‘, Phronesis, vol. 40, no. 2, pp. 156-81.

Forgas, J.P. & George, J.M. 2001, ‘Affective Influences on Judgments and Behavior in Organizations: An Information Processing Perspective’, Organizational Behavior and Human Decision Processes, vol. 86, no. 1, pp. 3-34.

Frijda, N.H. & Mesquita, B. 1994, ‘The social roles and functions of emotions’.

Kemp, E.A., Borders, A.L., Anaza, N.A. & Johnston, W.J. 2018, ‘The heart in organizational buying: marketers’ understanding of emotions and decision-making of buyers’, Journal of Business & Industrial Marketing.

Kitayama, S.E. & Markus, H.R.E. 1994, Emotion and culture: Empirical studies of mutual influence, American Psychological Association.

LeDoux, J. 1998, The emotional brain: The mysterious underpinnings of emotional life, Simon and Schuster.

Lerner, J.S. & Keltner, D. 2000, ‘Beyond valence: Toward a model of emotion-specific influences on judgement and choice’, Cognition & emotion, vol. 14, no. 4, pp. 473-93.

Loewenstein, G. & Lerner, J.S. 2003, ‘The role of affect in decision making’.

Markič, O. 2009, ‘Rationality and emotions in decision making’, Interdisciplinary Description of Complex Systems: INDECS, vol. 7, no. 2, pp. 54-64.

Neumann, F. 2017, ‘Antecedents and effects of emotions in strategic decision-making: a literature review and conceptual model’, Management Review Quarterly, vol. 67, no. 3, pp. 175-200.

Pfister, H.-R. & Böhm, G. 2008, ‘The multiplicity of emotions: A framework of emotional functions in decision making’, Judgment and decision making, vol. 3, no. 1, p. 5.

Schwarz, N. 2000, ‘Emotion, cognition, and decision making’, Cognition & Emotion, vol. 14, no. 4, pp. 433-40.

Secchi, D. 2010, Extendable rationality: Understanding decision making in organizations, vol. 1, Springer Science & Business Media.

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