Harvard Business Publishing

This article also appears in the December, 2007, issue of Harvard Business Review with the title "Hotter Heads Prevail."

The detached and impassive executive may fit the image of the ideal corporate decision maker, but people make better choices when they’re experiencing intense emotions, a study suggests.

That is, experiencing emotions but not being led astray by them. The study, by Myeong-Gu Seo of the University of Maryland’s business school and Lisa Feldman Barrett of Boston College’s psychology department, found that the most effective decision makers were those who had strong feelings while making decisions but were able to prevent their emotions from impeding their ability to reason.

The researchers, whose work appears in a recent issue of the Academy of Management Journal, put about 100 people, drawn from investment clubs, through a four-week online investing simulation. Just before they “bought” or “sold” stocks each day on the basis of the latest market data, the participants recorded their emotions and the intensity of their feelings.

Controlling for participants’ age and investment experience, the researchers assessed decision performance by calculating what the returns would have been if the participants had actually invested. (The participants were also rewarded—with real money—for making choices that would have yielded high returns.)

Participants who happened to be experiencing more intense emotions at the time they made their stock choices (whether related to the investment or not) did better on their investments. The findings support the view of researchers who believe that strong emotions, rather than being harmful in decision making, are beneficial to it because they boost attention and memory.

Accordingly, to improve the quality of decisions, companies should strive to rid themselves of the social constraints against intense emotions at work, the authors say. At the same time, managers and employees should try to increase their emotional self-awareness and learn to describe and differentiate their feelings—especially negative ones—during decision making. Participants with a more refined ability to perceive and describe their feelings, the study also found, were better at preventing their emotions from biasing their decisions.

See the complete contents of this month's Harvard Business Review.