The connections between decision making biases
Research Intelligence Brief – The Oxford Review The connections between decision making biases, values and leadership A new study from researchers at Bournemouth University and Royal Holloway University, London, has been delving into the connections between personal values, decision-making biases and leadership style. Lots of previous research (including my own) has shown that organisations, their leaders and staff need to be agile, responsive and innovative to meet changing, complex and hyper-competitive environments. A growing number of studies have shown that transformational leadership, as opposed to transactional leadership has better outcomes and levels of organisational performance when dealing with the paradoxes and challenges of rapidly changing environments. More recent research has shown that, whilst all leaders can display some of the traits of transformational leadership in less complex and less ambiguous/uncertain situations, when the complexity and levels of ambiguity increase, an inverse proportion (fewer and fewer) of leaders maintain the transformational traits needed to maintain employee engagement, innovation, agility and responsiveness to the situation. As the complexity of tasks increases an increasing number of leaders resort to transactional leadership traits.
Transactional Leadership
Transformational Leadership
Transactional leadership also known as managerial leadership, tend to focus on supervision, organisation, and driving performance. This a style of leadership usually promotes compliance through both rewards and punishments. The idea is that work is a direct transaction for money and reward and therefore performance can be manipulated through increasing the transactions (rewards) and discouraging low performance behaviours through punishments such as withdrawing support, a bad appraisal, a lower or no bonus for example.
Transformational leadership is where a leader works with people across the organisation and with external stakeholders to help identify what change is needed, creating a vision to guide change and creating commitment to the organisation, its values and any changes needed. It is more of a facilitative style of leadership that aims to build trust, involvement and commitment to the aims of the organisation.
There is now good evidence to show that, as cognitive load (amount of mental effort required in a situation) increases, people tend to fall back on their own deeper innate and more automated (less thought through) ways of operating and thinking.
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Research Intelligence Brief – The Oxford Review Increased cognitive load and stress together have been shown to reduce our working memory capability, cognitive flexibility and ability to take in new and peripheral information. It appears that one of the factors which contributes to lower cognitive load thresholds is the individuals’ values and beliefs. The study The researchers wanted to know how individual values impact thinking and cognitive load during complex and uncertain situations. 389 leaders in a range of organisations across the UK were observed and tested in a series of increasingly complex and ambiguous situations using the Schwartz Portrait Values Inventory (PVQ-40). They then looked at the results against five motivational types (from a Stanford Study): “ 1. The ‘SD’ (‘Sustenance Driven’) type - safety and belonging needs dominate, with the conservation values of tradition, conformity and security collectively scoring most highly. 2. The ‘OD’ (‘Outer Directed’) type - extrinsic, esteem of others’ needs dominate, with self-enhancing values of power and achievement collectively scoring most highly. 3. The ‘TD’ (‘Transitional Outer/Inner Directed) type - between the OD and ID types, with the openness to change values of hedonism and stimulation collectively scoring most highly. 4. The ‘ID’ (‘Inner Directed’) type - intrinsic, self-actualising and self-transcending needs dominate, with the values of self-direction, universalism and benevolence collectively scoring most highly. ID’s equate most closely with Transformational leadership traits. 5. The ‘MD’ (‘Moderated Drives’) type - no one set of neighbouring values outscores all others”. Findings 1. In terms of distribution in leaders across the organisations the study found that: a. Outer Directed (OD) (People whose power and achievement values dominate other values were the most numerous – 30%. b. Transitional Outer/Inner Directed (TD) (People with high hedonism and stimulation values) accounted for 29% of the total leadership population. c. MD’s or Moderated Drive people accounted for 21% of the leadership population.
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Research Intelligence Brief – The Oxford Review d. ID’s or Inner Directed people whose values congregated around selfactualisation, benevolence and self-direction/determinism were 12% of the leadership population. e. SD’s or Sustenance Driven individuals whose values centre around safety, belonging, tradition and conformity accounted for 7% of the leadership population. (What about the other 1%?) However it was found that OD’s form 62.5% of the very highest leadership roles and ID’s and SD’s only 5% each. 2. Risk. In order the following value types were the most risk and change averse (from most risk averse to least): a. SD’s b. MD’s c. ID’s d. OD’s e. TD’s Although there was no significant difference between ID’s, OD’s and TD’s in terms of being risk averse. 3. In terms of value priorities and leadership style it was found that OD’s (who form the high percentage of leaders) are most likely to display both transactional leadership behaviours and qualities and the most likely to regress to these behaviours in complex and uncertain situations. 4. ID’s or Inner Directed people who have stronger values most closely associated with transformational leadership are both the least likely type to attain the most senior leadership positions and the most likely to maintain transformational behaviours under situations of uncertainty and risk. 5. ID’s also showed the greatest levels of fluid intelligence and creativity and significantly greater than OD’s. 6. OD’s turned out to be the most inconsistent performers under situations of uncertainty and risk. 7. OD’s were also most likely to make decisions in complex situations that benefitted themselves, rather than the organisation or others. 8. SD’s performed the worst in all the situations of uncertainty and were the most likely to go with the majority. 9. OD’s and SD’s are the most prone to over-estimate their decision-making capabilities and how self-directed they are. Conclusions This complex study shows pretty emphatically that our values are strongly connected to the level and number of cognitive biases we have. People who are more interested in and have the values of either power and achievement, or safety and conformity (OD’s and SD’s) are the most likely to have stronger cognitive biases. People who are interested in being better people, and in benevolence are the least likely to have strong cognitive biases and tend to be more creative and more flexible. Under situations of uncertainty and risk the more introspective tend be most likely to retain transformative beliefs and behaviours.
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Research Intelligence Brief – The Oxford Review Reference Griffiths, N., Thomas, K., & Dyer, B. (2017) Values-related cognitive biases in decision-making: the impact on leadership and organizational agility. Secondary references Byrne, A., Dionisi, A. M., Barling, J., Akers, A., Robertson, J., Lys, R., Wylie, J, & Dupré, K. (2014). The depleted leader: The influence of leaders’ diminished psychological resources on leadership behaviors. The Leadership Quarterly, 25, 344–357 Dóci, E., & Hofmans, J. (2015). Task complexity and transformational leadership: The mediating role of leaders’ state core self-evaluations. The Leadership Quarterly, 26, 436– 447. http://dx.doi.org/10.1016/j.leaqua.2015.02.008
Overview This new research finds that there is a strong connection between values, decision-making biases and leadership style, particularly in situations of complexity and uncertainty. The majority of people who reach higher leadership positions tend to either have power and achievement or hedonism and stimulation type values. These tend to be associated with transactional leadership styles. People who are naturally more transformative tend to be more introspective, are less likely to seek power and tend to remain more transformative the more complex and uncertain things get. Uncertainty and complexity tends to place a higher cognitive load on individuals with higher values of achievement and power or hedonism and stimulation than people who are more benevolent and selfdirected.
www.oxford-review.com Copyright 2016-2017©The Oxford Review - All rights reserved
Transactional Leadership
Transformational Leadership
Transactional leadership also known as managerial leadership, tend to focus on supervision, organisation, and driving performance. This a style of leadership usually promotes compliance through both rewards and punishments. The idea is that work is a direct transaction for money and reward and therefore performance can be manipulated through increasing the transactions (rewards) and discouraging low performance behaviours through punishments such as withdrawing support, a bad appraisal, a lower or no bonus for example.
Transformational leadership is where a leader works with people across the organisation and with external stakeholders to help identify what change is needed, creating a vision to guide change and creating commitment to the organisation, its values and any changes needed. It is more of a facilitative style of leadership that aims to build trust, involvement and commitment to the aims of the organisation.
There is now good evidence to show that, as cognitive load (amount of mental effort required in a situation) increases, people tend to fall back on their own deeper innate and more automated (less thought through) ways of operating and thinking.
www.oxford-review.com Copyright 2016-2017©The Oxford Review - All rights reserved
Research Intelligence Brief – The Oxford Review Increased cognitive load and stress together have been shown to reduce our working memory capability, cognitive flexibility and ability to take in new and peripheral information. It appears that one of the factors which contributes to lower cognitive load thresholds is the individuals’ values and beliefs. The study The researchers wanted to know how individual values impact thinking and cognitive load during complex and uncertain situations. 389 leaders in a range of organisations across the UK were observed and tested in a series of increasingly complex and ambiguous situations using the Schwartz Portrait Values Inventory (PVQ-40). They then looked at the results against five motivational types (from a Stanford Study): “ 1. The ‘SD’ (‘Sustenance Driven’) type - safety and belonging needs dominate, with the conservation values of tradition, conformity and security collectively scoring most highly. 2. The ‘OD’ (‘Outer Directed’) type - extrinsic, esteem of others’ needs dominate, with self-enhancing values of power and achievement collectively scoring most highly. 3. The ‘TD’ (‘Transitional Outer/Inner Directed) type - between the OD and ID types, with the openness to change values of hedonism and stimulation collectively scoring most highly. 4. The ‘ID’ (‘Inner Directed’) type - intrinsic, self-actualising and self-transcending needs dominate, with the values of self-direction, universalism and benevolence collectively scoring most highly. ID’s equate most closely with Transformational leadership traits. 5. The ‘MD’ (‘Moderated Drives’) type - no one set of neighbouring values outscores all others”. Findings 1. In terms of distribution in leaders across the organisations the study found that: a. Outer Directed (OD) (People whose power and achievement values dominate other values were the most numerous – 30%. b. Transitional Outer/Inner Directed (TD) (People with high hedonism and stimulation values) accounted for 29% of the total leadership population. c. MD’s or Moderated Drive people accounted for 21% of the leadership population.
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Research Intelligence Brief – The Oxford Review d. ID’s or Inner Directed people whose values congregated around selfactualisation, benevolence and self-direction/determinism were 12% of the leadership population. e. SD’s or Sustenance Driven individuals whose values centre around safety, belonging, tradition and conformity accounted for 7% of the leadership population. (What about the other 1%?) However it was found that OD’s form 62.5% of the very highest leadership roles and ID’s and SD’s only 5% each. 2. Risk. In order the following value types were the most risk and change averse (from most risk averse to least): a. SD’s b. MD’s c. ID’s d. OD’s e. TD’s Although there was no significant difference between ID’s, OD’s and TD’s in terms of being risk averse. 3. In terms of value priorities and leadership style it was found that OD’s (who form the high percentage of leaders) are most likely to display both transactional leadership behaviours and qualities and the most likely to regress to these behaviours in complex and uncertain situations. 4. ID’s or Inner Directed people who have stronger values most closely associated with transformational leadership are both the least likely type to attain the most senior leadership positions and the most likely to maintain transformational behaviours under situations of uncertainty and risk. 5. ID’s also showed the greatest levels of fluid intelligence and creativity and significantly greater than OD’s. 6. OD’s turned out to be the most inconsistent performers under situations of uncertainty and risk. 7. OD’s were also most likely to make decisions in complex situations that benefitted themselves, rather than the organisation or others. 8. SD’s performed the worst in all the situations of uncertainty and were the most likely to go with the majority. 9. OD’s and SD’s are the most prone to over-estimate their decision-making capabilities and how self-directed they are. Conclusions This complex study shows pretty emphatically that our values are strongly connected to the level and number of cognitive biases we have. People who are more interested in and have the values of either power and achievement, or safety and conformity (OD’s and SD’s) are the most likely to have stronger cognitive biases. People who are interested in being better people, and in benevolence are the least likely to have strong cognitive biases and tend to be more creative and more flexible. Under situations of uncertainty and risk the more introspective tend be most likely to retain transformative beliefs and behaviours.
www.oxford-review.com Copyright 2016-2017©The Oxford Review - All rights reserved
Research Intelligence Brief – The Oxford Review Reference Griffiths, N., Thomas, K., & Dyer, B. (2017) Values-related cognitive biases in decision-making: the impact on leadership and organizational agility. Secondary references Byrne, A., Dionisi, A. M., Barling, J., Akers, A., Robertson, J., Lys, R., Wylie, J, & Dupré, K. (2014). The depleted leader: The influence of leaders’ diminished psychological resources on leadership behaviors. The Leadership Quarterly, 25, 344–357 Dóci, E., & Hofmans, J. (2015). Task complexity and transformational leadership: The mediating role of leaders’ state core self-evaluations. The Leadership Quarterly, 26, 436– 447. http://dx.doi.org/10.1016/j.leaqua.2015.02.008
Overview This new research finds that there is a strong connection between values, decision-making biases and leadership style, particularly in situations of complexity and uncertainty. The majority of people who reach higher leadership positions tend to either have power and achievement or hedonism and stimulation type values. These tend to be associated with transactional leadership styles. People who are naturally more transformative tend to be more introspective, are less likely to seek power and tend to remain more transformative the more complex and uncertain things get. Uncertainty and complexity tends to place a higher cognitive load on individuals with higher values of achievement and power or hedonism and stimulation than people who are more benevolent and selfdirected.
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