Credit where it’s due?

There is a whole range of factors to consider, but according to research by Dr Boon Han Koh, a Research Fellow in the Department of Economics, and his co-authors – it is the outcomes of our leaders’ decisions that play a major role in how we view them.

Political leaders, managers and community leaders often make decisions in risky environments. 

Getting lucky

In their study, Dr Koh, along with his colleagues Professor Nisvan Erkal at the University of Melbourne and Professor Lata Gangadharan at Monash University, analysed the responses of a sample group of 300 participants looking at the outcomes of decision-making in risky and uncertain environments.

The decision-maker chooses an action. The outcome, which depends on that action as well as an element of luck, determines the welfare of a group of individuals.

For example, political leaders, managers and community leaders often make risky decisions which affect the welfare of the group they are leading.

In Dr Koh’s experiment, the participants were not given any information about the leader, apart from the choices available to them and the outcome of the decision that he or she made.

Importantly, they didn’t see the leader’s decision-making process or their final choice.

“We presented our appointed group leaders with a choice. The first option came at a high cost to them personally, but increased the group’s chance of success to three in four. The second choice came at a lower cost to the leaders, but also a lower chance of group success – down to one in four,” says Dr Koh.

“So, the leader’s decision fundamentally depended on how much they care – or how altruistic they are – about their fellow group members.”

The researchers were interested in studying whether leaders’ outcomes are more likely to be attributed to luck and whether they receive sufficient credit for the choices they make.

The research looked at whether leaders receive sufficient credit for the choices they make.

Biases in the way we evaluate outcomes suggest that our leaders are unduly rewarded or punished for their actions. What is even more interesting is finding out that leaders’ good and bad outcomes are evaluated differently.

“We found that 20 to 30 percent of the time leaders chose the more altruistic option. The group did not know what the leader chose. But when a leader’s decision resulted in success, the participants attributed it to luck. When it resulted in failure, they attributed it to the leader’s poor decision-making abilities,” says Dr Koh.

So, where do these biases come from?

There may be many factors, but one that emerges from the study is that people are influenced by their own behaviour while forming their opinions about their leaders.

“What this means is that if, when put in the shoes of the leader, I make a selfish decision, then I am more likely to think that the leader would also make a selfish choice.

“Interestingly, it is also the people who would make selfish decisions themselves who believe that their leaders’ good outcomes are determined by luck, and not their choices,” he says.

“Hence, people who opt for their own personal gains are also the ones who tend to evaluate others badly.”

And the research has implications for big business.

People are influenced by their own behaviour while forming their opinions about their leaders. 

Such biases in the way managers and leaders are evaluated for their successes or failures can potentially contribute to a ‘fear of failure’ culture in many organisations. This can, in turn, be a major impediment to innovation and growth.

“We’re now thinking about a future design where we include potential repercussions on the decision maker and how this might influence leadership recruitment, promotion and incentives, and risk-taking behaviour in the business context.

“We will be studying the behavioural implications of the biases we identified,” says Dr Koh.

The nature of leadership

For Dr Koh, the research also unearthed questions about the nature of leadership and the way we view those in power.

Its experimental, interdisciplinary approach can help us understand our leaders at the most basic level – on what they achieve.

“Think about the news, how often do you hear about the great success of political leaders enacting a policy that satisfied the voters, and that people were happy about?” asks Dr Koh.

“Our study suggests that when we see a good outcome where a leader’s decision is profitable, or we get a reward from it – we often write it off as luck,” he says.

Where a leader’s decision is profitable, we often view it as luck.

The next step is understanding how our own biases in perceptions shape our actions and responses to our leaders’ outcomes.

“There’s a lot more at stake in the political environment, and there’s a lot more that affects decision-making including context and personal traits. For example. we’ve seen how biases surrounding gender can play a role in the perceptions people have and this needs more research,” says Dr Koh.

“Another thing to bear in mind, particularly in the political sphere, is the tendency for long-term interaction, because many political leaders are looking to get re-elected. They might also be motivated to enact policies that might earn them favour with certain types of voters.”

“This changes their incentives, and the way they make decisions, drastically – while we did not have this in our setup, it is important that we understand that process.”

But understanding how we – as voters, employees and followers – view the success or failure of people with decision-making power offers some insight into how our own biases play into our perception of leaders.

It is an important step in understanding the factors which shape leaders’ decision-making process.

This article was published by Pursuit.