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Are Leaders Rewarded for Taking Risks?

Does taking risks help a leader win an election or get promoted? In a new study, Yale SOM’s Oriane Georgeac, Gerben van Kleef of the University of Amsterdam, and their co-authors find that risk-taking can strengthen a leader in some situations, while in others it can backfire.

In 2017, Donald Trump announced to a crowd of journalists that “North Korea best not make any more threats to the United States. They will be met with fire and fury like the world has never seen.” A few months later, he took the sentiment to Twitter. “I too have a Nuclear Button, but it is a much bigger & more powerful one than [Kim Jong-un’s], and my Button works!”

Gerben van Kleef, a professor at the University of Amsterdam, was watching with astonishment.

“I was amazed not only with the fact that Donald Trump would flirt with this idea, but that somehow, that spoke to people,” van Kleef says. How could such risky geopolitical behavior be rewarded?”

Yale SOM’s Oriane Georgeac says that Trump’s behavior was part of an emerging pattern. “Aggressive rhetoric like this appeared to be on the rise among leaders across the world,” she says, noting a similar tone from Vladimir Putin in Russia, Tayyip Erdoğan in Turkey, and a number of others. “Taking risks, in language and action, seemed to be a genuine strategy among these people.”

Van Kleef, working with Georgeac and six other co-authors, looked into the implications of this trend, investigating whether and how a leader’s risk-taking might garner them support. Do people reward risk takers by granting them power? The results, published in the Journal of Applied Psychology, show that risky behavior tends to be rewarded in settings that are sufficiently competitive.

“A lot is already known about what leads to risk-taking—people’s personality traits, conducive social contexts— but the consequences of risk-taking, especially for whether or not these people ascend hierarchies and attain standing in organizations, are very poorly understood,” says Georgeac. “That’s what we wanted to explore.”

The researchers ran several studies to disentangle two potential avenues by which risk-taking might promote leadership support. Taking risks could, on one hand, lead to a perception of dominance, whereby risk-takers appear forceful or intimidating. A willingness to take risks could, on the other hand, contribute to perceptions of prestige, making the risk-taker appear as skillful or knowledgeable. Both turned out to be true, and the interaction of these perceptions opened important insights for when risky behavior is rewarded.

In one study, the researchers asked adult Israeli citizens whom they planned to vote for in an upcoming parliamentary election; they also asked the subjects the extent to which they considered each candidate to be a risk-taker, as well as the degree to which they perceived them as dominant and prestigious among their colleagues. One day after the election they again polled participants to find out how they cast their votes.

“We found that risk-taking enhanced perceptions of both dominance and prestige,” van Kleef says. Perceptions of dominance, in turn, were associated with a diminished willingness to vote for a candidate, whereas perceptions of prestige were associated with an increased willingness to do so.

Thus, while risk-takers, overall, were rewarded with votes, voters seemed torn, with perceptions of prestige benefiting candidates, and perceptions of dominance hurting them. “These perceptions created a bit of tension,” adds van Kleef, “as perceiving dominance in an individual typically results in an unwillingness to freely grant them power, whereas perceiving them as prestigious results in the opposite. So perceived dominance undermined people’s willingness to vote for risk-takers, whereas perceived prestige made them more willing.”

A subsequent study resolved this tension by altering the setting in which risk-takers operated. Participants were randomly shown a LinkedIn profile of somebody whose work and life experiences suggested they either embraced or avoided taking risks. From there, they were asked whether they would support the person to be leader in circumstances that were framed as either cooperative or competitive. For instance, would they endorse the person as the CEO of an oil company if their main task was working with governments to find alternatives to fossil fuels (a cooperative context)? What if, instead, they were racing other companies to exploit new oil fields (a competitive context)?

The researchers found that risk-takers were heavily endorsed in competitive settings, in which perceptions of prestige and dominance both proved favorable. “The dominance route to leadership, which is normally negative and stops people from handing power to risk-takers, shifted around and became positive under competitive circumstances,” van Kleef says. In cooperative settings, however, only perceptions of prestige positively predicted support – not perceptions of dominance.

Finally, the researchers looked at whether gender played any role in the way people perceived risk-taking. “We know from decades of research that women face a double-bind, whereby we want them to showcase stereotypically feminine qualities, such as communality and warmth, but people don’t typically associate these qualities with leaders,” Georgeac says. So how would risk-taking—a typically masculine trait—work for women? Would it help people see them as potential leaders, or would they face backlash for exhibiting behavior at odds with gender stereotypes?

As it turned out, the researchers found no differences between the treatment of men and women who take risks: people rewarded them equally in competitive settings; yet, as with men, only women seen as prestigious were afforded power in cooperative settings.

“It’s better to not take too many risks in a cooperative setting, as you may come across as overly dominant. But in competitive situations, you might strategically take more risks to make precisely that kind of statement.”

For individuals, van Kleef says, the implications of their results are straightforward. “If you aspire to a higher position, then it’s better to not take too many risks in a cooperative setting, as you may come across as overly dominant,” he says. “But in competitive situations, you might strategically take more risks to make precisely that kind of statement.”

At an organizational level, the findings are more nuanced. The researchers note, for instance, a potential “vicious cycle of risk-taking and upward mobility,” in which risk-takers in competitive settings are rewarded for their risks with power and standing, and thereby acquire the means to take more and larger risks — a scenario that could help explain outcomes like the global financial collapse in 2008. If organizations want to manage exposure to risky behavior, one approach might be to emphasize a more cooperative culture.

That said, van Kleef and Georgeac recognize that intense competition is unavoidable in some industries. In these cases, they noted the importance of systems that mitigate the risks that leaders at the top might take, and thereby avoid outcomes like a financial meltdown—or nuclear war.

“Leaders in politics or at the top of organizations can create global crises because of risky behavior,” Georgeac says. “We want to extend the discussion of what kind of structures are appropriate or needed to surround a leader with checks and balances in contexts that are especially competitive.”

Department: Research