If we’re mostly risk averse, then our reluctance to make certain decisions would be based upon the prospect of losing something measurable in the outcome. Hiring the ‘wrong’ executive for the job could cost the company its competitive edge. Accepting the wrong job offer might derail our career. Green lighting that major transformation initiative doesn’t mean the company will ever realize a profit from it.
However, if we’re mostly regret averse, then we’re not only worried about the market share or personal income or job security we could lose. Instead, we’re worried about how we’re going to feel if our decision turns out badly. We’re worried about how we’re going to look to others. We’re envisioning the damage our ego might suffer.
Which is not to suggest that reputational risk isn’t worth considering. It’s just that if we’re going to be honest and transparent with ourselves, then we need to admit our hiring decisions and job opportunities and corporate makeover strategies have less to do with the finance department and more to do with our emotional makeup.
As always, your comments are incredibly welcome.