The impact of affect on decision making competence and performance

Appropriate Confidence: A Key Management Skill

Appropriate confidence significantly correlates with the overall performance of managers, as well as with their ability to grow sales. Specifically, our study demonstrates how feelings prompt managers’ biases towards over- or under-confidence.

What Leads to Appropriate Confidence When Making Decisions?

Sound everyday decision-making is important in many occupations and is particularly important in management positions. Decisions that managers make affect their co-workers, their teams, their organisations and ultimately society.  The study investigated relationships between the financial performance of managers and their decision competence (risk appraisal, confidence, decision rules, and ability to resist framing), personality traits, and feelings.

The Study

Approximately 230 retail middle managers participated in surveys measuring personality, decision competence, moods, and emotional reactions to situations typically encountered by managers.

Key Findings

1. Appropriate confidence is important for achieving sales growth and overall performance.

Of the four decision competence (risk appraisal, confidence, decision rules, and ability to resist framing) areas investigated, having either too much or too little confidence is the decision making competence that impacts overall performance and sales growth the most negatively.

1. Feelings significantly influence the ability to remain appropriately confident.

One tends to get over-confident when feeling excited, bored, angry, or proud; one can be under-confident when afraid. The best decisions are made when in a calm and neutral state.

1. Personality Traits Matter Differently

Some personality traits are always beneficial to the decision-making competence of retail middle managers, while others are only beneficial under certain conditions. These personality traits (as measured by the Hogan Personality Inventory) are ALWAYS beneficial to decision making competence:

• Inquisitiveness counteracts boredom's distortive effect on confidence levels and excitement’s distortive effect on risk perception.

• A learning approach counteracts excitement’s distortive effect on confidence.

• Adjustment counteracts the distorted effect on risk perception of fascination (the high arousal/valence end of boredom).

These traits are CONDITIONALLY beneficial to decision making competence, depending on the mood/emotion interaction:

• Prudence counteracts boredom, helping to retain confidence, but not when a manager is tense.

• Sociability:

  • When a manager is not sociable, boredom impacts decision confidence levels more significantly.

  • Irritated extraverted managers are overconfident in their decisions, especially when feeling somewhat bored.

  • Those who experience more neutral moods and are sociable have the ability to eliminate the negative impact of boredom on risk taking.

• Ambition

  • Experiencing some level of boredom combined with ambition increases risk taking.

  • Highly bored and ambitious managers take too much risk, except when they are in a neutral mood. The neutral mood makes for calculated risk taking.

• Being agreeable counteracts the negative impact of boredom on risk taking, but only if a manager is not overly excited.