Power: Influence on Decision Making and Its Risks

Power significantly influences decision-making behavior, often leading to overconfidence, insensitivity to others’ perspectives, and increased risk-taking. Recognizing the behavioral and structural signals of power can help organizations identify potential governance risks. Implementing decision governance frameworks that enforce accountability, promote diverse input, and counteract cognitive biases ensures that decision-making remains balanced and evidence-based. This text outlines how power influences decision-making, the signals that indicate its presence, and governance strategies to counteract potential biases.

This text is part of the series on the design of decision governance. Decision Governance refers to values, principles, practices designed to improve the quality of decisions. Find all texts on decision governance here, including “What is Decision Governance?” here.

The Influence of Power on Decision-Making Behavior

The possession of power fundamentally alters cognitive processing, emotional regulation, and behavioral tendencies in decision-makers. Research in social psychology suggests several key effects:

• Increased Confidence and Overconfidence: Powerful individuals tend to display heightened confidence in their judgments. This can lead to decisive action, but also to overconfidence, where they underestimate risks and overestimate their knowledge or abilities (Anderson & Brion, 2014).
• Reduced Perspective-Taking: Studies indicate that power reduces an individual’s ability to adopt others’ perspectives, making them less empathetic toward subordinates or stakeholders (Galinsky et al., 2006). This insensitivity can lead to decisions that disregard the concerns or insights of others.
• Increased Risk-Taking: Power has been shown to elevate risk tolerance. Because powerful individuals perceive themselves as less vulnerable to negative consequences, they are more likely to take bold, and sometimes reckless, actions (Keltner, Gruenfeld, & Anderson, 2003).
• Resistance to Feedback: Power can make individuals less receptive to feedback, particularly if it challenges their authority or perspective. This effect can create an echo chamber, reinforcing poor decision-making processes (Fast, Sivanathan, Mayer, & Galinsky, 2012).
• Greater Goal-Orientation: On a positive note, power often enhances goal-directed behavior and persistence. Decision-makers with power are more likely to focus on long-term strategic objectives and to mobilize resources efficiently to achieve them.

Signals That Indicate a Decision-Maker’s Level of Power

Power dynamics in decision-making can often be inferred from behavioral, communicative, and structural signals:

Signals of High Power:

• Control Over Information: Decision-makers with power have access to privileged information and may control its flow within an organization.
• Initiating and Directing Conversations: Those with power often dominate discussions, set agendas, and interrupt others.
• Confidence in Decision-Making: Powerful decision-makers tend to make quicker and more decisive choices, often without seeking extensive input.
• Minimal Justification Required: The more powerful an individual is, the less they feel compelled to justify their decisions to others.
• Command Over Resources: Those with power dictate budget allocations, personnel changes, and strategic priorities with limited resistance.

Signals of Low Power:

• Deferring to Authority: Individuals with less power tend to seek approval or confirmation before making decisions.
• Hesitancy in Expressing Opinions: They may be reluctant to voice dissenting views or to challenge those in authority.
• Lack of Access to Information: Less powerful individuals often rely on secondhand information and have limited direct control over data.
• Greater Sensitivity to Group Consensus: Lower-power decision-makers are more likely to conform to group norms rather than assert independent judgment.

Signals That a Decision-Maker Is Ignoring Important Information or Taking Inappropriate Risks Due to Power

Power can distort perception and behavior, leading to poor decision-making outcomes. Key warning signs include:

• Disregard for Expert Advice: When a leader dismisses technical experts or refuses to consult relevant stakeholders, it suggests an overestimation of their own knowledge.
• Overly Optimistic Projections: Unrealistic expectations about project timelines, resource availability, or market conditions often indicate overconfidence.
• Suppression of Dissenting Opinions: Decision-makers who discourage debate or marginalize critical voices create environments prone to unchecked risk-taking.
• Resistance to Risk Assessment Processes: A refusal to engage in formal risk evaluations or to acknowledge potential downsides signals a potential governance issue.
• Frequent Rule-Bending: Decision-makers who frequently override policies or procedures in the name of efficiency or expedience may be taking inappropriate risks.
• Emotional Dismissal of Negative Feedback: Leaders who respond defensively to criticism rather than engaging with constructive input are likely ignoring valuable information.

Decision Governance Guidelines to Mitigate Power-Related Biases

To counteract the risks associated with power in decision-making, organizations can implement governance frameworks that promote accountability, transparency, and balanced decision-making.

• Structured Decision-Making Frameworks: Implement formal decision-making protocols that require structured risk assessments, scenario planning, and evidence-based evaluations.
• Checks and Balances: Introduce mechanisms such as peer reviews, advisory committees, and independent oversight bodies to prevent unilateral decision-making.
• Mandatory Stakeholder Consultation: Establish policies that require decision-makers to solicit input from diverse perspectives before finalizing key decisions.
• Regular Risk Audits: Conduct systematic reviews of decision outcomes to identify instances where power influenced inappropriate risk-taking.
• Encouraging Dissenting Voices: Foster an organizational culture where critical thinking and constructive dissent are valued and protected.
• Accountability Mechanisms: Implement clear lines of responsibility and consequences for decision-makers who ignore governance guidelines or engage in reckless behavior.
• Training on Cognitive Biases: Provide leadership development programs that educate decision-makers about the psychological effects of power and strategies to mitigate overconfidence and insensitivity.

References

• Anderson, C., & Brion, S. (2014). The loss of power: How illusions of control undermine the powerholder. Journal of Experimental Social Psychology, 52, 49-56.
• Fast, N. J., Sivanathan, N., Mayer, N. D., & Galinsky, A. D. (2012). Power and overconfident decision-making. Organizational Behavior and Human Decision Processes, 117(2), 249-260.
• Galinsky, A. D., Magee, J. C., Inesi, M. E., & Gruenfeld, D. H. (2006). Power and perspectives not taken. Psychological Science, 17(12), 1068-1074.
• Keltner, D., Gruenfeld, D. H., & Anderson, C. (2003). Power, approach, and inhibition. Psychological Review, 110(2), 265-284.

Decision Governance

This text is part of the series on the design of decision governance. Other texts on the same topic are linked below. This list expands as I add more texts on decision governance.

Introduction to Decision Governance

1. What is Decision Governance?
2. What Is a High Quality Decision?
3. When is Decision Governance Needed?
4. When is Decision Governance Valuable?
5. How Much Decision Governance Is Enough?
6. Are Easy Options the Likely Choice?
7. Can Decision Governance Be a Source of Competitive Advantage?

Stakeholders of Decision Governance 

1. Who Is Responsible for Decision Governance in a Firm?
2. Who are the Stakeholders of Decision Governance?
3. What Interests Do Stakeholders Have in Decision Governance?
4. What the Organizational Chart Says about Decision Governance

Foundations of Decision Governance

1. How to Spot Decisions in the Wild?
2. When Is It Useful to Reify Decisions?
3. Decision Governance Is Interdisciplinary
4. Individual Decision-Making: Common Models in Economics
5. Group Decision-Making: Common Models in Economics
6. Individual Decision-Making: Common Models in Psychology
7. Group Decision-Making: Common Models in Organizational Theory

Role of Explanations in the Design of Decision Governance

1. Explaining Decisions
2. Simple & Intuitive Models of Decision Explanations
3. Max(Utility) from Variety & Taste
4. Expected Uncertainty to Unexpected Utility
5. Perceptiveness & Experience Shape Rapid Choices

Design of Decision Governance

1. The Design Space for Decision Governance
2. Decision Governance Concepts: Situations, Actions, Commitments and Decisions
3. Decision Governance Concepts: Outcomes to Explanations
4. Slow & Complex Decision Governance and Its Consequences

Design Parameters of Decision Governance

Design parameters of decision governance, or factors that influence decision making and that we can influence through decision governance:

• Factors influencing how an individual selects and processes information
• Factors influencing information the individual can gain access to

Factors influencing how an individual selects and processes information in a decision situation, including which information the individual seeks and selects to use:

1. Psychological factors, which are determined by the individual, including their reaction to other factors:
   1. Attention:
      • Attention Depends on Stimuli & Goals
      • Motivated Reasoning: How To Detect And Mitigate Its Risks
   2. Memory:
      • Selective Memory Can Be Desirable
   3. Mood
   4. Emotions:
      • Emotions Mediate Decisions Always and Everywhere
   5. Temporal Distance:
      • Why Perception of Long Term Outcomes Should Be Influenced First?
   6. Social Distance:
      • Increased Social Distance (Over)Simplifies Explanations
   7. Expectations
   8. Uncertainty
   9. Attitude
   10. Values
   11. Goals:
       • Goals: How Goals Shape Decisions
       • Goals: How Goals Form and Change
       • Goals: Factors That Stabilize and Destabilize Goals
       • Goals: Factors Influencing Goal Selection
       • Goals: How to Improve Alignment to a Team Goal
   12. Preferences
   13. Competence
2. Social factors, which are determined by relationships with others:
   1. Impressions Of Others: How They Influence Decisions And How To Regulate Them
   2. Reputation
   3. Social Hierarchies:
      • Social Hierarchies: Why They Matter for Decision Governance
      • Social Hierarchies: Benefits and Limitations in Decision Processes
      • Social Hierarchies: How They Form and Change 
      • Power: Influence on Decision Making and Its Risks
      • Power: Relationship to Psychological Factors in Decision Making
      • Power: Sources of Legitimacy and Implications for Decision Authority
      • Power: Stability and Destabilization of Legitimacy

Factors influencing information the individual can gain access to in a decision situation, and the perception of possible actions the individual can take, and how they can perform these actions:

• Governance factors, which are rules applicable in the given decision situation:
  1. Incentives
     • Incentives: Components of Incentive Mechanisms
     • Incentives: Example of a Common Incentive Mechanism
     • Incentives: Building Out An Incentive Mechanism From Scratch
  2. Rules
     • Rules-in-use
     • Rules-in-form
  3. Institutions
• Technological factors, or tools which influence how information is represented and accessed, among others, and how communication can be done
• Environmental factors, or the physical environment, humans and other organisms that the individual must and can interact with
  1. Detail: Level of Detail Can Influence Probability Estimates

Change of Decision Governance

1. Public Policy and Decision Governance:
   • What is the Role of Public Policy in Decision Governance?
   • Dynamics of Public Policy Development
   • How Does Public Policy Influence Decision-Making?
2. Compliance to Policies:
   • Adapting a Decision Process to Comply with a Policy
   • How a Decision Process Can Create Evidence of Compliance
3. Transformation of Decision Governance
   • Punctuated Equilibrium: How to know if a Decision Process is ready for disruption
   • Policy Windows: What They Are And When They Occur
4. Mechanisms for the Change of Decision Governance
   • Incrementalism: What it is, and when/how to implement it in decision governance
   • Governance Dynamics: Change Driven by Cases and Principles
   • Governance Dynamics: Case-Based Development of Decision Governance