Moderate stress is normal and has positive benefits. However, as stress levels increase, our thinking can become clouded by negative emotions, and we’re prone to make poor decisions.
Numerous studies show stress can affect our approach to risk, which is strongly tied to investment and business strategy. The last thing you want is for your leaders to make poor strategic decisions because they’re not self-aware and not managing their stress properly.
But how do you prevent stress from taking over your leader’s decision-making processes?
Keeping Your Cool in Stressful Times Starts with Self-Awareness
Self-awareness is key. If you know how your personality type affects your natural approach to risk-taking, as well as what stresses you, you’re better able to keep yourself in check and avoid regrettable decisions.
Let’s look at how personality preferences may influence our risk tolerance, based on the Myers–Briggs Type Indicator® (MBTI®) assessment. MBTI personality type identifies whether we:
- Focus attention on the outside world of people and things (Extraversion) or the inner world of thoughts and feelings (Introversion).
- Trust and use information based on experience and the evidence of the five senses (Sensing) or consider the future and how things connect to make the big picture (Intuition).
- Make decisions based on objective logic (Thinking) or on values and how the decision will affect people (Feeling).
- Live in a more structured, organized way (Judging) or in a more flexible, spontaneous way (Perceiving).
How Personality Type Affects Risk Tolerance and Risk Aversion
One study found that investors with a higher tolerance for risk were more likely to have a Thinking preference, while those with a Feeling preference were more risk-averse.
Furthermore, another study found that those who prefer Introversion, Sensing, Feeling, and Judging were more risk-averse.
The research team also found an interaction effect between E-I (Extraversion-Introversion) and T-F (Thinking-Feeling). Among those who preferred Extraversion, those with a Feeling preference were more risk-averse than those with a Thinking preference. In other words, leaders who prefer ESFP, ESFJ, ENFP, and ENFJ types were more likely to be risk-averse than those with preferences for ESTP, ENTP, ESTJ, and ENTJ.
As stress levels rise, we tend to overuse our natural personality preferences.
If we’re prone to be risk-takers, under stress, we may take bigger risks, and vice versa if we’re naturally risk-averse.
By recognizing this tendency, leaders can check themselves during extreme strategic choices, such as the decision to liquidate parts of the business, reorganize departments, or proceed with layoffs (the last of which much research, including Bersin and Casio, has shown to yield more negative than positive outcomes).
Understanding Stressors and Coping Mechanisms
In addition to understanding our natural risk tolerance or risk aversion under stress, understanding personality type helps us better control stress by easily identifying things that stress us out.
Here’s a list of typical stressors for four of the 16 MBTI personality types (for a more complete list of stressors by type, check out this infographic):
- ISFJ: Disregard for established rules and regulations, insufficient time to prepare.
- INTP: Socializing, noise, and other interruptions, following strict guidelines.
- ENFP: Organization at the expense of creativity, micromanaging, over- commitment.
- ESTJ: Disregarding established rules, inefficiency, lack of control, constant changes.
Don’t Ignore Stress: Make Necessary Changes
You may have noticed two distinct camps — one stressed by a loss of structured routine and another stressed by too much structure.
It’s easy to see how either of these could be someone’s reality in leadership or executive positions.
If a leader suddenly finds themselves working from home or managing a team in a remote or hybrid work environment without previous experience, they may find that their routine has been unpleasantly disrupted and the structure they’d built disappearing.
On the other hand, a leader who prefers less structured work environments and is suddenly switched to remote work may find that their companies are asking for more reporting and checking in, all in the name of accountability. And they’re asking for the leader to also pursue the same accountability with the employees they manage.
Either way, the path to clear-headed thinking, which is paramount to striking a balance between risk tolerance and risk aversion that’s necessary for sound management, starts with asking yourself:
- What stresses me out?
- How is this increased stress level affecting my natural tendencies toward risk aversion or risk tolerance — will I tend to make more or less aggressive decisions?
- Which elements causing stress in my life do I have control over, and what can I do to mitigate them?
