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Do business decision makers have a say-do gap?
Much is commented on consumers' say-do gap but the very same issue among business decision makers may have more significant consequences
Much is written about the challenges of changing behaviour among the general public with regard to a range of purpose behaviours relating to sustainability, gender and ethnicity. But have business decision makers been subject to the same scrutiny as consumers? Of course businesses have a wide range of purpose objectives relating to these and other topic areas but just as there is a ‘say-do’ gap in consumers due to a range of pressures, then can we consider there is something similar going on for people working in organisations?
And while there is not the same level of data about business decision-maker say-do gaps as there is for consumers, it surely exists. For example, one study from the financial services sector found asset managers were struggling to action sustainability issues with 43% of managers unable to provide an example of a sell decision driven by an ESG view in the last 12 months.
This is an important topic given the way that people frequently identify governments and brands as having responsibility to find solutions for issues such as sustainability. Indeed, according to the US Energy Information Agency, industry is responsible for a greater degree of carbon output than consumer behaviour. Their report suggested that industrial sector consumed more of the world’s energy (54.8%) than commercial (7%), transportation (25.5%) sectors with consumer behaviour accounting for 12.6%.
While the activity of firms represents a large amount of energy usage and thus carbon emissions, a relatively small number of people are responsible for the decision making (relative to the general population) perhaps making intervention targeting easier. Moreover, while business decision making is often seen as being logical and based on careful deliberation of information, more recently there has been a focus on how psychological factors shape business decision making. Indeed, much as cognitive processes, emotional and social influences all contribute to the say-do gaps that are seen in consumers, these same influences are coming to light for business decision makers as well.
Hence, this certainly makes a case for exploring what may result in a ‘say-do’ gap for business decision makers. We discuss a number below:
Defensive decision making
One area that deserves some examination is that of defensive decision making. Work on the way doctors make decisions on behalf of their patients is perhaps interesting here. In an interesting study, Rocio Garcia-Retamero and Mirta Galesic asked eighty general medical practitioners to complete a questionnaire involving choices between a risky and a conservative treatment. One group of doctors made decisions for their patients. Another group of doctors predicted what their patients would decide for themselves. Finally, all doctors and patients made decisions for themselves and described the factors they thought influenced their decisions.
What they found was that doctors selected much more conservative medical treatments for their patients than for themselves. Most notably, they did so even when they accurately predicted that the patients would select riskier treatments. When asked about the reasons for their decisions, most doctors (93%) reported fear of legal consequences.
So we can see that experienced and highly trained professionals may not be making optimal decisions based purely on the information about each of the treatment options. Instead, there are a range of additional factors that come into their decision above beyond the immediate considerations of the treatment options. In this case the legal consequences were of concern, resulting in doctors selecting a more conservative treatment option.
While this study concerned medical decision making, we can certainly see how this translates to other contexts resulting in business decision makers acting more conservatively and being reluctant to make shifts towards potentially risky options that bring about wider societal benefits.
Challenging decision environments
Business decision making does not take place in a vacuum of course, and as such there needs to be a careful consideration of the environments in which they are embedded, as these shape the nature of how a decision might unfold. Bjorn Meder and colleagues developed a taxonomy of different types of environment in which decision making takes place which includes:
Underprepared environments: In this case there are simply not the facilities available to support effective decision making. For example, while some work has been done to scope out how business decisions can be made with a sustainability lens, this is arguably still under-developed. As such, when asked to make decisions with a ESG lens, there may be little clarity over how that decision should be made and on what criteria should be considered.
Counteracting environments: This is when opposing forces in the environment can diminish or neutralize the effect of good intentions. In business decision making the focus on costs and profitability take precedence and difficult to move away from. Hence, when a sustainability option is considered, but requires an added cost or may result in a reduction in profit, this can have a strong counteracting impact on the decision.
Understanding and classifying these different environmental considerations helps us to better recognise the constraints on delivering positive sustainability outcomes by business decision makers.
Group decision making effects
Decisions in organisations are rarely made by one individual independent of others. As such, looking at the psychology of group decision making is useful to understand the sources of possible ‘say-do’ gaps. To explore this, we can draw on work done for the Institute and Faculty of Actuaries concerning pension trustee behaviours in firms.
For example, some research suggests that groups of people (such as committees or boards) make inferior decisions because they fail to capitalize on the differentiated knowledge of individual members. A meta-analysis by Li Lu and colleagues found that these effects can be quite large. Groups talked about information that they all had access to far more than individually offered information. So although larger groups should encourage more information sharing for individuals and subsequent group knowledge-building, the evidence seems to indicate that this may well not happen.
In another study Roy Baumeister and colleagues found that decision making groups often treat cohesion as a critical goal, despite it often resulting in poor outcomes. Although cohesion may seem especially desirable when consensus is sought, it does not necessarily improve, and can in fact harm the quality of group decisions.
Overall, many decisions in organisations are taken as a group and whilst there are frequently cited benefits to making decisions in this way, the research literature is awash with examples of the ways that group context can have detrimental effects on decision making.
Social identity shaping outcomes
Dan Kahan’s identity-protective cognition framework makes a case for the way in which the cultural values we hold define our social identities – which in turn then shape our beliefs about disputed matters of fact (e.g., whether humans are responsible for climate change; whether the death penalty prevents murder).
This helps to explain why groups with different cultural outlooks (such as left or right of centre political orientation) disagree about important societal issues. On this basis disagreement is not due to people failing to understand the science or even that they lack relevant information. Instead, according to Kahan, disagreement is generated from the way “people endorse whichever position reinforces their connection to others with whom they share important ties”.
With this in mind, the cultural identities of organisations can be very strong with people often identifying with the values of their employers: indeed this is arguably one of the key elements of effective employee engagement. Many people are adept at reading the cues of the tacit cultural identity of their organisation which may at times also be at odds with the stated noble corporate aspirations in place.
Understanding the tacit as well as the desired cultural identities at play is therefore an important consideration as this will create a cascading impact on what values individuals hold and the way these shape and inform business decisions.
The area of organisational decision making is one that can be harder to access (more costly, logistically complex) and it can therefore escape scrutiny of the easier to research consumer decision making. But nevertheless, as we have seen, there is a case to be made that this is a place where highly consequential decisions are made concerning a range of issues with wide societal implications.
Understanding the social-psychological mechanisms that underpin business decision making offers a means by which tangible actions that can be taken to address the shortcomings and strive for enhanced outcomes.
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