Why Smart Leaders Don’t Always Make Rational Choices

The Neuroscience of Emotion, Risk Perception and Executive Judgement

A CEO receives an unexpected call.

A major customer has decided to terminate a long-standing contract.

Revenue projections will need to be revised. The leadership team is concerned. The board will demand an explanation.

Within hours, the CEO calls an emergency meeting.

Someone must be held accountable.

Budgets must be cut.

A restructuring plan is proposed.

The response appears decisive. But there is a question nobody has asked:

How much of this decision is being driven by the facts—and how much by the CEO’s emotional reaction?

We often assume that experienced executives make decisions primarily through logic, analysis and sound judgement.

Yet decades of psychological and neuroscience research suggest a more complicated picture.

Emotions do not simply follow our decisions. They can influence how we interpret information, assess risk, evaluate alternatives and ultimately decide what to do.

For leaders responsible for significant financial and human consequences, this distinction matters.

The greatest threat to executive judgement is not necessarily having emotions. It is failing to recognize when emotions are influencing decisions.

1. The Myth of the Completely Rational Leader

Traditional leadership thinking often treats rationality and emotion as opposing forces.

Good leaders are expected to remain objective.

Emotions, meanwhile, are frequently viewed as distractions that interfere with sound judgement.

But the relationship is not that simple.

In a major review published in Annual Review of Psychology, Lerner and colleagues examined how emotions influence judgement and decision-making. Their findings highlight that emotions can affect decisions even when those emotions arise from situations unrelated to the decision itself.¹

For example, frustration from a difficult morning meeting may influence how an executive evaluates an investment proposal later that day.

The executive may believe the evaluation is entirely objective.

Yet their emotional state may influence which risks feel important, which arguments seem persuasive and how much uncertainty they are prepared to tolerate.

This does not mean that emotions always produce poor decisions.

Emotions can also provide valuable information, direct attention to important concerns and support effective judgement.

The problem arises when emotional influences remain unrecognized.

A decision can feel rational while still being shaped by emotion.

2. Fear and Anger: Two Emotions, Different Decisions

Consider two executives evaluating the same uncertain business opportunity.

Both have access to identical financial projections, market research and risk assessments.

One is feeling anxious.

The other is feeling angry.

Would they necessarily interpret the opportunity in the same way?

Research suggests not.

Lerner and Keltner demonstrated that fear and anger can have different effects on risk perception.²

Fear was associated with more pessimistic risk assessments, while anger was associated with more optimistic assessments.

This distinction is especially relevant in leadership.

An anxious CEO may become overly cautious about expansion, even when the opportunity is commercially attractive.

An angry CEO may underestimate potential risks and pursue an aggressive strategy with excessive confidence.

Neither response is inevitable. Context, personality, experience and the decision itself all matter.

But the research illustrates an important principle:

It is not simply whether a leader is emotional. The particular emotion may influence how the leader perceives risk.

This creates a potential blind spot in executive decision-making.

We routinely examine financial assumptions, market assumptions and operational assumptions.

How often do we examine the emotional assumptions influencing our interpretation of those facts?

3. The Affect Heuristic: When Feelings Become Shortcuts

Executives rarely have unlimited time to evaluate every decision.

They must assess complex information, often while managing competing priorities.

To simplify these demands, the brain uses mental shortcuts.

One such shortcut is known as the affect heuristic.

Research by Slovic and colleagues describes how positive or negative feelings about something can influence judgements of its risks and benefits.³

Consider an executive evaluating two potential business partners.

The first is charismatic, confident and highly persuasive.

The second is reserved, analytical and less engaging.

Both present comparable financial proposals.

The executive may feel more comfortable with the first partner.

That positive impression could influence how the proposal’s risks and benefits are evaluated.

The decision may subsequently be justified through financial analysis, even though the initial preference was partly emotional.

The reverse can also happen.

A leader who dislikes a particular manager may evaluate that manager’s proposal more critically, even when the underlying evidence is sound.

The affect heuristic is not inherently harmful. Emotional impressions can sometimes reflect relevant experience.

But they are not substitutes for evidence.

When a business opportunity feels attractive, ask whether the numbers support the feeling—or whether the feeling is influencing how you read the numbers.

4. Why Removing Emotion Is Not the Answer

Does this mean executives should suppress their emotions and rely exclusively on logic?

Not necessarily.

Neuroscience offers an important counterpoint.

Antonio Damasio’s somatic marker hypothesis proposes that signals associated with emotions and bodily states help guide decision-making, including how people evaluate possible outcomes.⁴

The hypothesis has generated substantial scientific discussion and should not be interpreted as a complete explanation of human decision-making.

Nevertheless, it challenges the simplistic assumption that emotion and rationality operate independently.

Consider an experienced CEO who feels uneasy about an acquisition.

The financial projections look attractive.

The valuation appears reasonable.

But something does not feel right.

That discomfort may reflect accumulated experience: perhaps similarities to a previous failed acquisition, concerns about management credibility or subtle inconsistencies in the information presented.

The feeling itself does not establish that the acquisition is flawed.

But it may provide a reason to investigate further.

The executive should neither dismiss the feeling nor blindly follow it.

Instead, ask:

What is this feeling telling me to examine?

Emotional intelligence in decision-making is not about eliminating feelings. It is about recognizing them, understanding their possible origins and testing them against evidence.

5. Five Questions Before Your Next High-Stakes Decision

How can leaders translate these insights into practical action?

I recommend five questions as a simple executive reflection framework.

1. What am I feeling right now?

Identify the emotion as specifically as possible.

Is it anger, anxiety, frustration, excitement or disappointment?

Different emotions may influence judgement in different ways.

2. Is this emotion connected to the decision?

A difficult conversation earlier in the day may have little relevance to a proposed investment.

Yet the emotional effects of that conversation may still be present.

3. What assumptions am I making because of how I feel?

Am I exaggerating the risks because I feel anxious?

Am I underestimating them because I feel confident or angry?

Am I rejecting an idea because I dislike the person presenting it?

4. What would the evidence suggest if I felt differently?

This question encourages executives to distinguish emotional impressions from objective considerations.

It does not require dismissing emotion. It requires examining whether the evidence supports the conclusion.

5. Does this decision require immediate action?

Some decisions are genuinely urgent.

Others can benefit from a brief pause, independent review or additional information.

The objective is not to delay every difficult decision.

It is to avoid allowing temporary emotional intensity to dictate a consequential choice.

These five questions are a practical leadership reflection tool informed by decision-making research, rather than a separately validated intervention.

6. Leadership Capability Is Not the Same as Leadership Capacity

Organizations invest heavily in developing leadership capabilities.

Strategic thinking.

Financial analysis.

Risk management.

Decision-making.

Negotiation.

These capabilities are essential.

But possessing them does not guarantee that they will always be applied effectively.

A CEO may understand risk management yet become excessively confident when angry.

A senior executive may be highly analytical yet allow anxiety to distort their evaluation of an opportunity.

An experienced leader may understand the importance of objectivity yet struggle to recognize the emotional influences shaping their judgement.

This is where the distinction between capability and capacity becomes important.

Capability refers to the skills and knowledge a leader possesses.

Capacity refers to the cognitive, emotional and physical resources available to apply those capabilities effectively.

Emotional self-awareness is one part of that capacity.

A leader who can recognize an emotional reaction, examine its relevance and return attention to the evidence is better positioned to use their existing decision-making skills deliberately.

This does not mean that better emotional awareness guarantees better business outcomes.

It means that understanding emotional influences deserves a place alongside traditional leadership development.

Organizations cannot rely exclusively on developing what leaders know. They must also pay attention to the conditions under which leaders apply that knowledge.

Leadership Insight: Your Emotions Are Part of the Decision

The next time you face a difficult leadership decision, pay attention to more than the financial projections, market intelligence and strategic alternatives.

Pay attention to yourself.

What are you feeling?

How might that feeling be influencing your interpretation of the facts?

Would you reach the same conclusion in a different emotional state?

Emotions are not weaknesses to be eliminated from leadership.

They are part of human decision-making.

Sometimes they provide useful signals.

Sometimes they introduce bias.

The challenge is knowing the difference.

The most effective leaders do not pretend to be emotionless. They develop the awareness and capacity to recognize when emotions are helping their judgement—and when they may be distorting it.

Because in leadership, the quality of a decision depends not only on the information available.

It also depends on the mind interpreting that information.

References

1. Lerner JS, Li Y, Valdesolo P, Kassam KS. Emotion and decision making. Annual Review of Psychology. 2015;66:799–823. https://doi.org/10.1146/annurev-psych-010213-115043.

2. Lerner JS, Keltner D. Fear, anger, and risk. Journal of Personality and Social Psychology. 2001;81(1):146–159. https://doi.org/10.1037/0022-3514.81.1.146.

3. Slovic P, Finucane ML, Peters E, MacGregor DG. The affect heuristic. European Journal of Operational Research. 2007;177(3):1333–1352. https://doi.org/10.1016/j.ejor.2005.04.006.

4. Damasio AR. The somatic marker hypothesis and the possible functions of the prefrontal cortex. Philosophical Transactions of the Royal Society B: Biological Sciences. 1996;351(1346):1413–1420. https://doi.org/10.1098/rstb.1996.0125.