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Smart Business Leaders Understand Confidence Affects Decision-Making

Smart business leaders understand that confidence affects decision-making and ultimately a company’s earnings. But giving employees positive feedback in the hopes of promoting better decisions sometimes can backfire, suggests new research from the Kellogg School of Management, the psychology department at Northwestern University, and the London Business School.

Across several studies, the research examines how boosting self-esteem - whether contemplating one’s own accomplishments or receiving positive feedback from others - affects the face-saving impulse to justify and recommit to decisions whose outcomes seem dubious at best.

The authors find that some types of positive feedback can actually escalate perceived threats to the ego and increase the need to prove that a questionable decision was the right one.

The challenge is to instill confidence in people so they can change, rather than justify, the course of a failing strategy, concluded lead author Sivanathan. “Our work offers organizations a framework for systematically leveraging self-affirmation processes so that people will be less likely to recommit to decisions not producing optimal results.”

Gillian Ku, Assistant Professor of Organisational Behaviour collaborated and co-authored this article along with; Niro Sivanathan (Kellogg; joining LBS this Autumn), Daniel Molden (Northwestern University), and Adam Galinsky (Kellogg). The research will be published in an article titled “The Promise and Peril of Self-affirmation in De-escalation of Commitment,” currently in press at Organizational Behavior and Human Decision Processes (published by Elsevier).

Created: Monday 31 March 2008

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