Motivation and emotion/Book/2015/High-risk business motivation

Overview
The traditional view of human decision processes provides that people make rational decisions predicated on maximising pleasure or gains and minimising pain or losses (Denes-Raj & Epstein, 1994). However, in the world of business, investors tend to deviate from rationality when making financial decisions (Kuhnen & Knutson, 2005). These decisions can have serious financial and social implications, therefore the consideration of risk can often involve weighing potential gains against significant financial losses.

Why do people take risks? Do financial incentives motivate? Why do some individuals have greater tolerance levels for risk taking compared to others? This book chapter will address all of these questions and offer an insight into why people are willing to participate in high risk decisions. This chapter will then present {[which}}relevant psychological theories and how they address the key areas of motivation and understand what motivates people to engage in high risk decision making.

The key messages of this chapter are:
 * Risk is everywhere and involved in a lot of decisions we make;
 * Risk isn't always bad;
 * People are motivated very differently;
 * Motivation is complicated, dynamic and can occur a variety of different levels
 * Money is not everything;
 * Everybody has needs;
 * There are cultural and gender differences in what motivates us!

Risk
Pfleeger (2000) explained that a risk is an event that may result in negative consequences. Ideally, an individual would endeavor to determine whether any unwelcome events are likely to occur during the planning stages of an event. The individual can then make plans to avoid these events or minimise their negative consequences that may arise from participating in an unpredictable exercise (Pfleeger, 2000).

This perception of risk is that it is a decision making process that is associated with a high likelihood of a negative outcome occurring (Mishra, 2014). This negative outcome will impact an individuals risk-taking propensity; which is an individual’s current tendency to take or avoid risk (Tang, & Tang, 2007). This perspective has a significant impact on an individual's capacity to make any decision as almost every decision has an element of risk applied. Tang et al. (2007) suggest that risk-taking in general has a negative relationship with business performance. However, this perspective has limitations as with all great decisions and an element of risk must be present.

Evidence suggests that the path to being successful in the world of business is paved with ambiguity and uncertainty (Haifeng Zhaosibin, 2014). The motivation for success is often the key determinant for the success or failure of many business ventures. The world of business is complex and many of the choices made will be based on a thorough and sound decision making process, although in a range of circumstances this may not necessarily lead to the desired outcome. Therefore businesses must take on a large element of risk in their decision making (Weller, Ceschi, & Randolph, 2015).

Risk has a psychological reward as the decision making process produces the release of dopamine after an unexpected reward makes humans willing to take risks (Zwieg, 2002). This is particularly relevant as a lot of huge financial gains have come from decisions that had a large amount of risk involved. An example of this is Apple entering the telephone markets, the markets were already packed with cell phones and this could have easily failed. Risky decisions like this that make behaviour of those involved in such dealings would be compared to those of an individual who engages in gambling or addictive behaviours. Current research reveals that a similar pattern of human psychology emerges in both the business of investment and gambling. The use of magnetic resonance imaging (MRI) to study men’s brain activity has found that the same part of the brain responds similarly to significant financial wins as it does to cocaine use (Lainas, 2008).

If you think your a risk taker, take the test - http://www.projectionpoint.com This test will indicate whether or not you are a risk taker and how this effects your decisions making.

Decision making
The level of risk taking in decision making will be affected by the relationship between the decision maker's education level and their risk preferences (Yonghai, Wei, & Ke-Chiun, 2013). Therefore, from this concept, one would assume that someone who is more highly educated would engage in less risky behaviors. Yonghai et al. (2013) presents that corporations in China run by leaders who have a higher education level are more likely to better inform their decision making experience for longer and have more successful periods of growth. This concept has support because in many circumstances individuals are often willing to sacrifice their own economic payoffs in the interest of being honest, even in the absence of punishment or reputational factors (Zhu, Jenkins, Set, Scabini, Knight, Chiu, & Hsu., 2014),

However, a study conducted by Greenberg (2013) indicated that individuals who are asked to imagine that they will be wealthy in the future will make significantly more risky decisions. The concept is well supported by Coval and Shumway (2005) who found that if a trader lost a significant amount of money in the morning, then the afternoon would be much more risk intensive as the trader attempted to chase the money that they had lost. This study was focused primarily on people who were trading in high volume markets which would indicate a high level of education. Therefore from these two contrasts one could believe that culture plays a significant role in the motivation to engage in risk taking behaviour in business.

Extrinsic motivation
The term extrinsic motivation refers to the individual’s inclination to perform tasks in order to attain positive rewards, such as tangible or verbal rewards (Sun Young, & Jin Nam, 2009). This will affect the behaviour of the individual, as they may only wish to engage in certain activities for a tangible reward; in business, this reward would often be in the form of a financial incentive.

Extrinsic motivation can often undermine intrinsic motivation and self determination (Deci, 1971). The possibility of attaining financial incentives has the potential to control employee behaviour, which according to Deci and Ryan (1985,) can often undermine the likelihood of an employee taking risks, but in business, individuals are often chasing money, and Jenkins et al. (1998) presents that if we get our employees to just go after money, we then create a culture where people are only participating in these activities to create more money.

Intrinsic motivation
Intrinsic motivation is a natural motivational concept that arises spontaneously out of the needs for self-determination and competence (Deci & Ryan, 1985b, 1991 as cited in Reeve, Nix, & Hamm, 2003). One is said to be intrinsically motivated to perform an activity when he receives no apparent rewards except the activity itself. This intrinsic motivation can be either innate or learned.

Deci (1971, 1975) proposed that if a person's feelings of competence and self-determination are enhanced, their intrinsic motivation will increase. If the feelings of competence and self-determination are diminished, the intrinsic motivation will decrease. This concept would then suggest that some rewards or feedback will increase intrinsic motivation through this process and others will decrease it, either through this process or through the change in perceived locus of causality process (Benabou & Tirole, 2003). McClelland (1961) provides that there are intrinsic motivational factors associated with risk and encoded as a part of an individual personality. This would explain why people at high levels of organisation are in the positions that are they, they possess an innate requirement to rise through the ranks.

What is the difference between intrinsic and extrinsic motivation?
The key difference between these two types of motivation are apparent through Hull’s drives, which are primarily involved in extrinsic motivation and drives which are concerned with intrinsic motivation. Extrinsic motivation entails the Hull-Spence drives of hunger, thirst, sex, and pain/anxiety avoidance. In contrast, non survival needs, or so-called ego motives such as curiosity, competence, autonomy, and play, comprise intrinsic motivation (Reiss, 2012). This concept plays out in the world of business, with a range of extrinsic and intrinsic tools being made use of in different scenarios. The use of rewards (extrinsic motivation) can encourage employees to take more risks, whilst engaging in risky behaviour due to an individual desire (Mclelland, 1971), and to show greater competence to oneself would be an example of intrinsic motivation. Cognitive evaluation theory suggested first that external factors such as tangible rewards, deadlines, surveillance, and evaluations tend to diminish feelings of autonomy, prompt a change in perceived locus of causality from internal to external and undermine intrinsic motivation (Gagné, & Deci, 2005).

Implicit needs
Implicit motives are unconscious recurrent preferences that arouse motivation in a task (McClelland, Koestner, & Weinberger, 1989). These motives are broken down into three key areas. Gröpel & Kehr (2014) describe these three motives as: The Need for Affiliation does impact on the individual and the propensity to take risks, therefore it is not discussed in detail.
 * 1) Achievement Motive - completing a task in a proficient manner;
 * 2) Power Motive - The ability to exert a degree of influence or control over people or a situation; and
 * 3) Affiliation Motive - The individuals attached importance to maintaining and engaging in personal relationships.

McClelland's need theory
Implicit motives are dispositions that have traditionally been labeled needs, for example, need for achievement (nAch), need for power (nPower), and need for affiliation (nAff) (Mclelland, 1971). McClelland considers these concepts to be developed early in life and to be an important element of human decision making as they drive, direct and select behaviours (Spangler, 1992). These three facets of behaviour help to understand how and why people make the decisions that they do.

Here is a short video which explains the application of McClelland's Need's Theory - https://www.youtube.com/watch?v=5VD3DEf5y4o.

Need for achievement (nAch)
McClelland (1961) argued that individuals with need for achievement prefer tasks that involve skill and effort, provide clear performance feedback, and were of moderate challenge or risk. This is supported by research conducted by Elliot and Dweck (1988) suggested that risk bearing behaviour was the major indicator that separated those who were successful in business from those who were not so successful. Need for achievement has a common link with success in business and positive economic outcomes (Unger, Rauch, Weis, & Frese, 2015).

These theories help explain a number of reasons why people would engage in high risk decisions. An individual who is highly motivated by the need for achievement and their achievement goal is to have a successful career in business would then direct their implicit motive into doing the activity that is required to achieve this goal (McClelland, Koestner, & Weinberger, 1989). However, they will not be inclined to be involved in activity that has moderate to high levels of risk. A high nAch implies that would only accept situation of moderate to low risk, however they would accept responsibility for results and seeks feedback on action outcomes (Unger et al. 2015).

Need for power (nPower)
The need for power is defined as the desire to have impact on others by influencing, persuading, helping, arguing with, or attacking them (McClelland et al. 1989). The need for power is closely aligned with power motivation, which refers to an individual’s intensity of desire to influence others, acquire recognition, and gain social status (Jie, Yun, & Xu, 2015). McClelland et al. (1989) used a series of test to determine the effect of power of motivation, the goal was to make individuals believe that a high score on a social perception test would indicate that they were in a position of power and from this, they could influence others or exert an element of control over their peers. The results conclusively proved that power motivated people to outperform others, as long as they believed that the results would provide them with a greater degree of power (Winter,1991).

This concept highlights that individuals will engage in high pressure situations that possess a great deal of risk if they perceive that this could potentially increase their ability to exert influence and extend their power over others.The success of an executive will often depend on their power motivation, those whose score high in power and high in responsibility will generally have successful career, whilst those who have power and score low in responsibility will often engage in aggressive impulsive behaviours, which will hinder their ability to be successful (Capa, Audiffren, & Ragot, 2008).

People with high power motivation often satisfy this motivational need through leadership roles or by pursuing a career as a business executive, as this role will result in legitimate interpersonal power over others. this will satisfy the requirements of this particular personalty type, these roles also cater for individuals need for risk, and these individuals who fill these role with a high degree of power, are much more likely tolerate a greater level of risk, in order to take greater reward (Jie, Yun, & Xu, 2015). A pertinent example of this concept would be the HIH insurance scandal, where the company tolerated a great deal of risk by providing false and misleading statements, as the rewards became greater. This provided a great thrill whilst having a high level of risk.

Sensation seeking & risk theory
Zuckerman (1994) was the early proponent of sensation seeking theory. This theory provides that an individual will seek out a range of different circumstances which are diverse, often quite complex and highly intense experiences. The individual will posses a great willingness to encounter a range of risks for sake of the experience, and the emotional or physical high which would be derived from such an experience (Zuckerman, 1994).

Sensation seekers find high risk financial deals entertaining and the increased possibility of something going wrong, only seems to make the matter more exciting. It is the variety, novelty, and perceived risk of these deals that makes them entertaining (Grinblatt & Keloharju, 2009). The risk that is undertaken would not be considered rational or sensible by a regular human being, instead these high risk deals are driven by a considerable behavioural component. This irrational behaviour is caused by a concept known as overconfidence.

Overconfidence
Overconfidence is the tendency of people to overestimate the accuracy of their knowledge (Sharma & Shakeel, 2015). Grinblatt et al. (2009) provide a similar definition and provide that overconfidence is the tendency to place an irrationally excessive degree of confidence in one’s abilities and beliefs (Grinblatt & Keloharju, 2009). This overconfidence was an ever present in the collapse of Enron, where the most obvious issue in the business was that individuals possessed an incredible amount of over confidence. The company had built a culture that made individuals believe they could handle an exceptional level of risk without fear of danger or repercussion (Hall, 2006). The executives of the company had an innate need to be the best and from this grew a greed for the financial incentives that came with it, this example highlights the undermining effect that extrinsic motivation can have on intrinsic motivation (Deci, 1975).

Money and the brain
The human brain is a complex and complicated organ which seems to have a a never ending series of developments and changes as the human beings evolve. When an individual wins, loses or even participates in an activity which requires them to risk a sum of money, a range of emotions are stirred up inside, these emotions are hope, sunrise, regret, greed and fear (Zweig, 2007). There is an important relationship to identify between the psychology involved in the investment element of business and that in gambling. The same part of the brain is affected when people are gambling as when they making a significant financial decision (Lainas, 2008).

When faced with a high risk decision that requires a choice to pursue a course of action that brings an immediate reward at the risk of incurring future negative consequences, they choose the immediate reward and ignore the future consequences. This is particularly apparent when people are forced to deal with situation which will result in significant financial gain. As Zweig (2002) presented earlier, the less likely or predictable a reward is, the more active your dopamine neurons become and this will continue to make the individual feel elation, almost in a state of euphoria.

Current research
Achievement motivation theory (McClelland, Atkinson, Clark, & Lowell, 1953), the strength of motive to achieve success relative to avoiding failure provides an individual with achievement motivation. In the corporate business world, this desire will generally be relative to high standards of excellence. Atkinson and Feather (1966) suggested that achievement motivation combined two kinds of personality constructs: tendency to approach success and tendency to approach failure.

The topic of business decisions, risk and reward is currently undergoing further development. When doing business, the existence of risk is high, and as the financial stakes get higher, this element of risk must also increase. The idea that a great reward will be be provided upon the completion of the task motivates some, others are even more motivated when the magnitude of the reward may be more uncertain (Luxi, Fishbach, & Hsee, 2015). This theory provides that three key criteria must be met in order for
 * 1) Uncertain rewards can increase time & resource investment from the individual;
 * 2) From an economic perspective,uncertain rewards can be less expensive because an uncertain reward can be more motivating than a certain reward of a higher expected value; and
 * 3) Uncertainty can be a source of positive intrinsic motivation and therefore increase an individuals motivation and once the task is completed, their overall satisfaction.

Self-determination theory
Self determination theory provides when employees are externally motivated, they engage in activities because of external reasons, such as to receive a reward or to avoid punishment. In contrast, employees who are motivated in an internal manner do things because of internal, yet instrumental reasons, such as avoiding feelings of worthlessness, shame, or guilt (Vandercammen, L., Hofmans, J., & Theuns, P. 2014). These theories would suggest that extrinsic goal pursuits tend to be associated with poorer well-being and less optimal functioning than do intrinsic goal pursuits (Vansteenkiste, M., Lens, W., & Deci, E. L. 2006).

According to Self Determination theory, motivation occurs along a continuum, which begins at amotivation, which is completely bereft of self determination, to intrinsic motivation, which is completely determined by the individual. In addition to these two concepts is extrinsic motivation.

Self-determination theory (Deci and Ryan 2000) provides that here are three key factors that allow for intrinsic motivation, namely, competence, autonomy and relatedness.

These concepts are broken down further (Deci, E. L., Ryan, R. M., Gagné, M., Leone, D. R., Usunov, J., & Kornazheva, B. P. 2001): If an employee is not interested in their job and the risk of the decision making does not appeal to them, then the involvement in such a program will require the employee to make a link between engaging in such a risky decision and a tangible reward or a degree of approval from the boss and another important figure for the individual (Deci, et al. 2001). An example of this would be Wall street, where the expectation is that employees makes risky decisions and the more reward they attain, the greater the respect from their manager. This would mean that the employee is going to be extrinsically motivated.
 * Competence requires succeeding at optimally challenging tasks and attaining desired outcomes;
 * Autonomy requires experiencing choice and feeling like the initiator of one’s own actions ; and
 * Relatedness requires a sense of mutual respect, caring, and reliance.

Extrinsic motivation
The concept of extrinsic motivation is very important to business, as a business will often attempt to build a culture where certain behaviors are expected, examples of this are provided below:

External Regulation: Is when an individual who engages in behaviour to avoid negative consequences, this is prominent in business, as if you not meeting your budget, the likelihood of an employee losing their job is extremely high. This behavior will occur regardless of whether the goal of behavior is to obtain rewards or to avoid sanctions, the individual experiences an obligation to behave in a specific way. Therefore if their is firm wide culture of high risk for high reward, then the employee would behave in a manner which suits that culture (Guay, F., Vallerand, R. J., & Blanchard, C.,2000 & Chantal, Y., Vallerand, R. J., & Vallieres, E. F.,1995).

Integrated Regulation: occurs when one comes to experience an organization among regulatory processes within which they can harmoniously coexist. This particular form of extrinsic motivation does possess a degree of autonomy, it is not intrinsic. The activity may not be interesting for the individual, but may be of particular important for personal goals. If an employee does not particularly like having to make high risk decisions, but to get to be the manager of a particular firm then they must make such decisions, then they will do that, but they are still not necessarily engaged by the activity.

Identified Regulation: occurs when a behavior is valued and perceived as being chosen by oneself. The individual does the activity because they perceive it to be the right thing to do, even though they do truly believe in doing it. It is often just completed as a means to an end. In this situation, the employee participates in the behaviors as it appears to be the right thing to do, although they may not truly be buying in to the experience. They are participating in a behaviors as they might value being in the workplace and want to work for a particular firm.

Introjected Regulation: occurs when one performs the activity by internal pressure such as guilt and self-approval, this means an employee acting in accordance with behaviours or else they may be overcome with guilt if they do not.

Watch a lighthearted look at extrinsic motivation and how the Panda becomes motivated differently from other students - https://www.youtube.com/watch?v=OFrrbDSEc2o

Gender differences in motivation
There is significant evidence to support a different in risk taking behavior between genders. Females tend to have a lower preference for risk when making financial decisions, particularly if they place a greater emphasis on security. In contrast, males tend to have a greater focus on achieving a higher rate of return. This research also presents that male are often attempting to achieve the highest possible return, whilst in financial considerations, females are more strategically inclined to avoid the worst outcome (Powell & Ansic, 1997).

There is an argument for the potential for risk taking increasing dramatically in business as the executive levels tend to be dominated by men. Young males in environments that would be considered to be highly competitive tend to engage in risky behavior due to disparity in their current state and their desired goal state (Mishra, 2014). Mishra (2014) explains that this desired state is derived from the success of competitors, therefore extrinsically motivated, and risk taking behavior will increase an the individual attempts to minimize the difference between the current and desired state of affairs.

The Brain
When an individual makes a decision, they may seek out information from a industry expert or a trusted, well educated associate. An individual could have all the appropriate information to make a decision and can identify that a sensible decision could provide a reasonable return. This concept is further explored by Suen et al. (2014) when individuals defy authority, or believe they are doing this to make an investment decision there is increased activation of the anterior cingulate cortex and the superior frontal gyrus, and this increased activation makes an argument that decision making may be based on imbalances in activity in the brain. It is natural for people to go back to previous decision that they have made and rely on those to inform future decision making. This brain activity would indicate switching from a reliance on the advice to relying on previous trials or previous experience to guide decision-making.

Living more effective motivational and emotional lives?
This article has provided a range of different methods for motivating individuals. The challenge for everyone is to find out how they can best use it to motivate themselves, or even their peers or their employees. Motivation can often change people and be the catalyst for change, not only in their behavior but also in how they view and define themselves (Lickel, B., Kushlev, K., Savalei, V., Matta, S., & Schmader, T. 2014). This article has provided a range of different motivational theories and how they can impact on the perception of events.

Lets take a look back at the key messages: This article has provided the context for a range of motivational concepts. If you are at work and wondering how this could effect you, this article should make me consider why you do the job you do? Maybe you need to be taking more risks!
 * Risk is everywhere and involved in a lot of decisions we make;
 * Risk isn't always bad;
 * People are motivated very differently;
 * Motivation is complicated, dynamic and can occur a variety of different levels
 * Money is not everything;
 * Everybody has needs;
 * There are cultural and gender differences in what motivates us!

Every day we take risks, whether we are aware of them or not, how we decide to engage with these risks and our work will determine how much we can achieve when we take the risk to go to work.In high level business decision making, risk forms a large part of the work that is undertaken, and research conducted by Mishra (2014) indicates people are more likely to engage in risky aggressive and criminal conduct if they are unsuccessful at economic competition, therefore if an individual is already extremely competitive, then several less than favorable outcomes will only exacerbate risky behaviors.

Motivation comes from a range of different sources, whether you want incentives or you are driven from within. The research has shown that money will not necessarily make you happy, and it will be a promise of your success!

Everybody has needs, and with the research presented we can determine what makes us motivated, and how we can best put that towards making us happy!

Conclusion
The aim of this chapter was to use psychological theories to provide an insight into why people engage in high risk business decisions. This chapter has a range of theories which have identified the importance of needs, self determination, intrinsic and extrinsic motivation. The purpose of this article was to enable people to understand that even when people are placed in identical situations their motivation to participate may be significantly different.

Test yourself!
{Intrinsic Motivation can be defined as:


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-An Old Wooden Ship

-Unconscious recurrent preferences that arouse motivation in a task.

-The value of a company, stock, currency or product determined through fundamental analysis without reference to its market value.

+A natural motivational concept that arises spontaneously out of the needs for self-determination and competence.

{Sensation Seeking & Risk Theory was originally proposed by:


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-Mark Zuckerberg

-Marvin Zindler

-Alfred Binet

+Marvin Zuckerman

{The Three keycriteria for McClelland Need's Theory are:


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- The Need for Shelter, Need for Warmth and Need for Speed.

- The Need for Goals, Needs for Shelter and Need for Power

+ The Need for Achievement, Need for Power and Need for Affiliation.

- The Need for Warmth, Need for Power Need for Challenges

{4. The neurotransmitters that helps control the brains center for pleasure and reward is?


 * type=""}

+ Dopamine

- Seratonin

- Neuron

- Homeostasis