Indeed, data is a powerful tool for executives, delivering them greater analytical depth than ever before. However, despite vast pools of information, the emotional still precedes the rational when it comes to business decisions.
This is the key finding derived from an expansive research study conducted by the FORTUNE Knowledge Group in collaboration with gyro, the global ideas shop. The study polled 720 senior executives (88 percent of whom have director-level titles or higher) to explore how emotions and other subjective factors influence business decision-making.
It finds that senior officers have come to count on, and value, a heady mix of intangibles to guide them in a world awash in data. In fact, the majority of the executives (62 percent) freely say it is necessary to rely on gut feelings. They state that soft factors (such as a business partner’s corporate culture or reputation) should be given the same weight as quantifiable factors (cost, quality or efficiency).
Interviews with academics and leaders in firms named to FORTUNE’s World’s Most Admired Companies and Best Companies to Work For lists further support the survey’s emotion-first findings. In fact, the qualities revealed — powerful company cultures, strong reputations in the marketplace and a penchant for trust-based relationships — tend to be the ones that help these companies achieve their positions on the lists.
A case in point is Whole Foods, which is No. 20 on FORTUNE’s 2014 list of Most Admired Companies. According to Executive Vice President of Operations David Lannon, softer factors carry the day when the quality of suppliers’ goods is comparable.
“Of course you have to do your due diligence,” Lannon says, “but if we’re not making a connection or there are any issues with company values, it might cause us to keep looking around for other people who are making a similar type of product. We could be in a relationship with a company for 20, 30 or 40 years. So we have to ask ourselves if we really want to hang out with them for all that time.”
This sentiment is clearly reflected by nearly three-quarters (71 percent) of executives who say feelings motivate them to sacrifice immediate bottom-line gain in favor of long-term liaisons with organizations they trust. Scott Beth, vice president of finance operations at the software company Intuit, No. 8 on this year’s Best Companies to Work For list, agrees.
“Gut reaction is essential to any decision-making process,” Beth says. “When a trigger goes off, being conscious of it and then exploring what it means is extremely important. Occasionally someone’s approach makes me uncomfortable. Or I’ll have a positive gut reaction that tells me I’m really clicking with a person.”
The ongoing challenge of finding a balance between instinct and evidence appears to be triggered by the tsunami of intelligence now available to most firms. Nearly two-thirds (65 percent) of executives agree that the increasing complexity of their business environment has made it more difficult to base decisions purely on “functional factors” (such as cost, quality or efficiency). In fact, only 16 percent disagree with this proposition.
Key underlying challenges include lack of analytical capacity to extract actionable information from data (37 percent), excessive data volume (34 percent) and rapidly increasing variety of information types (31 percent). This finding suggests that while the right amount of big data can help businesses make sense of a highly dynamic marketplace, too much information can overwhelm, resulting in diminishing returns.
Ironically, an unmanageable deluge of information has inspired a significant majority of executives to embrace their id — to lean in and trust a more innate approach to decision-making. As a number of recent studies indicate, the concept of rationality is fluid at best.
To download the full “Only Human: The Emotional Logic of Business Decisions” white paper, click here.