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Risk is relative. Do you love to win, or hate to lose? Behavioral economics offers us some insights. Our emotional reaction to losing is more negative than our positive reaction to winning according to authors Daniel Kahneman and Amos Tversky. Let’s apply that to leadership development.
If you hate to lose, to feel pain, that can hold you back from giving direct feedback to staff. Avoiding a conversation, the thinking goes, will be less painful that having it and seeing no improvement. Of course, avoiding a needed conversation about performance improvement also eliminates the possibility of winning – in that case winning a stronger team member.
By examining the emotional costs of decision making, the behavioral economics metaphor offers insights for leadership development. It’s tempting to think that financial and leadership decisions are all logically sound, all through the Thinking lens but perceptions and emotions, the Feeling lens are part of being human.
Sometimes leaders regard tasks such as recruiting, delegating or giving feedback as taking away from their real job. When we spend hours anticipating the pain of interviewing, recruiting, and orienting a new hire, we can delay action for months. That delays the benefit of each of those actions.
In behavioral economics, Narrow Framing refers to the approach which looks at numbers but not context. It results in poor decisions, because risks and rewards are misperceived.
Leadership decisions also need to take in risk, and context.
Adjusting Leadership Risk-Taking
The same advice for investments applies to leadership:
- Take the long view.
- Adjust strategy less frequently for longer term strategic wins.
- Look more closely at the context.
- Zoom out from the details and the context to the relevant landscape.
For more on how to gain leadership perspective, see my book Zoom Leadership: Change Your Focus, Change Your Insights. https://transformationmanagement.com/zoom-leadership/
Janet Britcher, MBA is President of Transformation Management, LLC and a Certified Executive Coach for leaders and managers. She has extensive experience as a leader and, prior to starting her own company in 2002, as head of Human Resources. She provides one-on-one executive coaching, especially for managers recently promoted or destined for promotion, and offers leadership workshops to transform leadership effectiveness.