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Back To Blog > How Understanding the Risk/Reward Workings of the Brain can Make More Productive Employees


This post is by Anthony Savage of Sparta Health

The brain is a woefully complicated organ, whose inner workings have evaded human understanding for centuries. However, with modern medical insights, the way our minds work has been slowly but surely elucidated. The way the brain perceives risk and reward is a crucial factor in decision making, and is thus something essential to keep in mind when managing employees. An in-depth understanding of the risk/reward workings of the brain can improve workplace health and is an invaluable leadership tool for anyone in a management position looking to get the most out of their employees while ensuring the maintenance of good mental health.

One way in which understanding the risk/reward workings of the brain can inform the decisions of those in management positions is by accounting for the effects of stress on risk/reward processing. One 2012 study found that acute stress impacts the perception of both risk and reward, and furthermore, that the effect is different in males than in females (1). The study found that stress enhances learning about positive outcomes but impairs learning about negative outcomes of choices, meaning that workers will learn less from a wrong decision if under stress. This leads one to the conclusion that important decisions that could provide valuable learning opportunities should not be left up to workers experiencing high levels of stress, as if the wrong choice is made, the worker is less likely to learn from their mistakes. The study also found that stress increases willingness to tolerate risk in males but has the opposite effect in females. Therefore, arguably, those in a leadership position should be mindful of stress levels of those employed under him or her, and adjust who decisions are given to depending on sex, stress levels, and the amount of acceptable risk accordingly. An ingrained understanding of how stress can impact decision making in this way, is important to ensure that managers do not overload stressed workers and maintain optimum workplace health.

Dopamine is the key neurotransmitter involved in risk-reward pathways and understanding how and why it is produced can provide valuable insights into the type of incentives that can effectively motivate a workforce. Neurons that release dopamine are activated when we expect to receive a reward (2). Furthermore, dopamine enhances reward-related memories; if a worker has successfully performed a task in the past, and was properly incentivised with a reward that effectively stimulated the production of dopamine, then they will associate the task with dopamine release, and thus be more amenable to performing the same task in the future. This is at the heart of what we can learn from dopamine in the brain – providing effective incentives and rewards for tasks in the workplace can not only motivate people to perform the task, but also increase productive. Since dopamine is released not just upon receiving a reward, but also upon the expectation of a reward, a culture of incentivisation in the workplace can lead to dopamine release upon task assignment, as workers anticipate that they will be given a reward once the task is complete, and thus make workers more eager to rise to new challenges. Those in leadership positions must keep this in mind and provide good incentives for the successful completion of tasks that activate the relevant dopamine pathways in the brain.

Another factor to keep in mind when thinking about risk/reward pathways in the human brain is loss aversion. Loss aversion is the name given to the phenomenon observed when people have a choice between two options with differing risks and rewards. In a nutshell, the brain tends to give more weight to the potential negative consequences of a decision than the potential positive consequences, and thus people tend to lean towards making decisions that minimise loss as opposed to those that maximise gain. This is famously illustrated by investors that hold on to an asset even after significant depreciation, hoping it will recover and that they will be able to avoid losses, when in reality this decision leads to even greater losses more often than not. Armed with this knowledge, leaders are more able to critically evaluate the choices of their employees, and account for the biases they are liable to. If one is aware that their employees are likely to avoid losses, perhaps at the cost of gains which, in a dispassionate risk-reward analysis, would outweigh the negative outcomes, managers can override decisions that are made in this spirit, and thus improve the quality of overall decision-making in the company.

The risk-reward workings of the brain inform every decision we make. While the brain is broadly good at categorising risk and reward, it is far from perfect, and everyone is liable to certain biases and logical fallacies. If those in leadership positions are equipped with the requisite knowledge about how risk-reward pathways in the brain work, they are able to account for these weaknesses and more effectively evaluate decisions their employees make. Furthermore, this knowledge would allow managers to better allocate decisions to those best equipped to make them, depending on the particular situation at hand. Finally, an understanding of this field allows leaders to take better care of the mental health of their employees, ensuring workers stay healthy, happy and productive. Overall, understanding the risk-reward workings of the brain is an essential component of effective and productive leadership, and should be made a priority for anyone in a management position.

About Anthony Savage 

Anthony Savage is the Medical Services Manager at Sparta Health, having joined the team in 2017 and is responsible for the overall operational delivery of our high quality services to our clients. He has a solid background in workplace physiology, health and safety, as well over 12 years of delivering, and holding senior management positions, for leading injury and condition management providers.

He is known for his innovative approach in his design and execution of services and his ability to build enduring relationships.

References:

  1. Mather M, Lighthall NR. Both Risk and Reward are Processed Differently in Decisions Made Under Stress. Curr Dir Psychol Sci. 2012 Feb;21(2):36–41.
  2. Halber D. Motivation: Why You Do the Things You Do [Internet]. [cited 2020 Oct 1]. Available from: https://www.brainfacts.org:443/thinking-sensing-and-behaving/learning-and-memory/2018/motivation-why-you-do-the-things-you-do-082818
Brain Waves

Comments

Steve D Bennett

27 October 2020 at 10:50

NEGATIVITY BIAS IN THE BRAIN
Have you ever found yourself dwelling on an insult or fixating on your mistakes? Criticisms often have a greater impact than compliments, and bad news frequently draws more attention than good. The reason for this is that negative events have a greater impact on our brains than positive ones. Psychologists refer to this as the negative bias (also called the negativity bias), and it can have a powerful effect on your behaviour, your decisions, and even your relationships. The negativity bias, also known as the negativity effect, is the notion that, even when of equal intensity, things of a more negative nature (e.g. unpleasant thoughts, emotions, or social interactions; harmful/traumatic events) have a greater effect on one's psychological state and processes than neutral or positive things. In other words, something very positive will generally have less of an impact on a person's behaviour and cognition than something equally emotional but negative. The negativity bi

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