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Why leaders make bad decisions

Leadership is about serving others and always has been a selfless action. It involves taking yourself out of the picture and considering the needs of others. However, too often, we see leaders involved in self-interest to the detriment of the people they are appointed to serve. Leadership is a way of thinking that takes other people into account even when your own needs are pressing. It focuses on what is right or best in the broader interest of stakeholders.

It is common knowledge that everyone acts in their self-interest, including those occupying leadership positions. It is said that self-interest provides the motivation that drives people to aspire and achieve success, which we believe to be a positive thing. But the problem here is that our capacity to identify and exclude our ordinary self-interest from consideration is always overestimated. Then our self-interests dominate and dictates the outcome in the way we desire. The crisis around the world today is sparked by the drive to fulfill individuals’ sheer interests. We would be mistaken to assume that the destructive consequence of self-interest in decision-making is rare and only limited to a few
dishonest or misguided leaders. The effect of self-interest is pervasive. The actions of the most thoughtful and upstanding leaders can be influenced by it. And when we are trying to prevent it from doing so, it may affect our decision.

We all tend to be biased by our interests without realizing the full impact of those interests on our decision. At various times, we have seen leaders holding nothing in trust for those they purport to serve, instead merely advancing their ideas and hopes. Therefore, when it comes to human nature, self-interests beat objectivity, which leads to making bad decisions.

William Macaux argues that some leadership models, like Servant Leadership and Transformational Leadership, emphasize ethical propriety and morally right behavior as critical factors. And moral virtue plays a motivational role, usually through providing inspiration linked to some more significant good that people have reason to care about.

There is at least an implicit invocation of virtue in Jim Collins’ Level Five Leadership and Authentic Leadership, but none of these theories exclude self-interest as a motivational factor. So, how do we reconcile motivations of self-interest with ethics in business and leadership?

We often hope that those in leadership will embrace their decision-making responsibilities with a clear head and an open heart; sadly, experiential reports have shown this is not the case. Instead, leaders are often selfish. Consider President Barack Obama’s opinion regarding the financial crisis in 2008, “This recession was not caused by a normal downturn in the business cycle. It was caused by a perfect storm of irresponsibility and poor decision-making that stretched from Wall Street to Washington to Main Street”.

This scenario shows how self-interested actors engaged in unethical behaviors that sparked an economic crisis. For business leaders, access to resources is a moving target, leaving many leaders feeling protective of what’s theirs. And when they take more than their fair share of the extra resources for themselves at the expense of others, they often do so because they honestly think they are entitled to these resources and believe they have earned the right to take more.

Morela Hernandez, professor of business administration at the Darden School of Business, University of Virginia, explained that scholarly research on decision-making reveals that feeling entitled to a larger share of a resource might come from objective assessments reality but rather from what social scientists call motivated reasoning.

Here, motivated reasoning occurs when people “selectively notice, encode, and retain information that is consistent with their desires.” People use this kind of logic to reach conclusions that help them support their self-serving beliefs. Hernandez also argued that understanding the effects of self-serving ideas is a tricky business.

In the last decade of research in behavioral ethics, for instance, scholars have moved away from a “bad apples” approach in which only people with low moral characteristics are deemed likely to behave unethically. Instead, researchers have examined how people can engage in self-serving behaviors while convinced of rightness and fairness.

Now the question is, how do leaders identify self-interest that may inappropriately distort their decision-making process?

Self-interest can take many forms, ranging from achieving financial rewards, job perks, and career advancement. Another way is to accomplish specific goals and targets that greatly pressure decision-makers, enhance prestige and reputation, be famous and popular, have fun, and achieve a better lifestyle.

However, in this context we are only interested in those areas of self-interest that might inappropriately distort the leader’s decision. Hence, the practical way to identify inappropriate self-interest is to consider the options that the decision-maker is trying to make. The process involves three questions: What choices are available or unattractive to the decision-maker considering the short- and long-term interests? Secondly, how will these choices conflict with the short- and long-term interests of other stakeholders? Thirdly, can this self-interest greatly distort the decision-making process of the leader in significant ways?

Self-interest shows up in varying guises, and they never alert you to your blind spots as it influences decision-makers even when they are trying to be objective. The reality is that the decision-maker often believes a decision is rational and may even convince others of the arguments’ reasonableness. However, self-interest is at work behind
the scenes, leading decision-makers to underestimate its effect, but they do so at their own peril.

Toye Sobande is a Lawyer and Leadership Consultant. He is a Doctoral Candidate at Regent University, Virginia Beach, USA, for a Ph.D. in Strategic Leadership. He can be contacted by Email: contactme@toyesobande.com

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