Leadership and decision-making series: In a polarised world with geopolitical tensions, economic uncertainty and fast paced technological change, the leaders we choose, and the decisions we make, matter – whether we are consumers, employees or citizens. Understanding human behaviour is central to this. This series looks at academic research trying to unravel these issues.
The best leaders have a broad toolbox they can use to improve an organisation. The question is, which tool should they choose to bring about change? This is a question Christian Zehnder, Professor of Organisational Decision Making at HEC Lausanne, is studying.1
Economics offers a useful starting point because it gives researchers a common way to analyse human decision-making. “Economists disagree about almost everything,” says Christian Zehnder. “But they largely agree on the framework for analysing human choice.” This framework assumes that people make choices based on their available options, the outcomes dependent on these options, their beliefs about the situation and other people, and their preferences — meaning their values, tastes and sense of what feels appropriate.
“This approach offers a systematic way for leaders to think about how they can influence employees,” explains Zehnder. “Leaders can use many tools, but they all operate through four basic channels: outcomes, available options, beliefs and preferences.”
Incentives and delegation
Monetary incentives and how work is delegated are examples of tools that shape outcomes and available options. They correspond to what leadership scholars typically call transactional leadership.
“Incentives can be extremely powerful,” says Prof. Zehnder. “If the task is simple and performance is easy to measure, performance pay can strongly increase motivation. But in complex environments, incentives can backfire badly. If performance is multidimensional and hard to measure, strong incentives may encourage employees to game the system.” (see the article about charismatic leadership with Tiffany Kreutschy)
In modern work environments where creativity and proactive behavior are decisive, leaders also need to rely on employees’ intrinsic motivation. “If you want people to innovate, they need enough autonomy to implement their ideas,” says Christian Zehnder. “Delegating responsibility can be powerful, because it provides employees with the necessary options.”
Beliefs, motivation and purpose
Tools that shape beliefs and preferences are closer to transformational leadership. They are less about changing contracts or decision-making boundaries, and more about shaping expectations, shared purpose, values and culture.
“In every organisation, people need to coordinate their expectations and actions,” says Ch. Zehnder. “Leaders can shape beliefs about what others will do and where the organisation is heading.” His research on charisma studies how communication can influence motivation and support collective goals.2,3
Shaping culture and spreading change
The final channel concerns values and social norms. “People care about outcomes, but they also care about what feels appropriate within an organisation,” says Zehnder. “This is why leadership is also about culture: the shared norms that define how things are done in a given organisational context.”
Changing such norms is difficult. Leaders may try to influence a specific group first, but whether new behaviours spread depends on the context. “We need to understand how leaders should select the group they influence directly “and how they can steer and reinforce the spillovers that transport change throughout the organisation,” states Zehnder.
The aim is not simply to list leadership tools, but to understand when each tool is likely to work. “Different organisational problems require different leadership interventions. The next step is to develop a choice framework that helps leaders use their leadership toolbox more systematically. We now have a clearer map of these influence channels. The challenge is to learn how to use this map in practice,” he concludes.
Reference:
- (in Press) Zehnder, C. Leadership: A (Behavioural) Economist’s Perspective. In: Haig, Guzzo, R., Grote, G., Nalbantian, H., Lalive, R. (Eds.). Interdisciplinary Foundations for Organisational Science and Application: A Dialogue between Psychology and Economics (The SIOP Organizational Science, Translation, and Application Series), Oxford University Press.
- Antonakis, J., D’Adda, G., Weber, R. & Zehnder, C. (2022). Just Words? Just Speeches? – On the Economic Value of Charismatic Leadership. Management Science, 68, 9, 6355-7064.
- Antonakis, J., Buffat, J., Kreutschy, T. & Zehnder, C. (2026). Charismatic Leadership: An Antidote to the Pitfalls of Incentives?, Working Paper, University of Lausanne.
