Study: The atmosphere in the room can influence strategic decisions

The atmosphere within a group can influence the outcome of strategic decisions, according to a new study involving the Bayes Business School (formerly Cass). The study was published in the Journal of the Academy of Management.

Paula Jarzabkowski, Professor of Strategic Management at Bayes, along with researchers from the University of Queensland, Macquarie University and Leuphana University Lüneburg, found that different atmospheres caused people to speak and interact in different ways, which in turn changed their interpretation of strategy.

For example, when the atmosphere was thoughtful, participants were cautious about how to proceed, whereas in an inquisitive atmosphere they felt free to be exploratory in developing their strategy. However, when the atmosphere was tense or unwelcoming, participants became argumentative and had difficulty agreeing on a course of action.

The researchers examined video recordings, workshops, interviews and first-hand observations of a strategic project team of managers and consultants at an electronic bank in Australia, conducted over 18 months. The observations examined the interactions of the bank team evaluating a digital product that used AI-powered technologies to help bank customers manage their spending.

The scientists also found that the atmosphere can change quickly, with subtle changes in tone, language, or body language affecting the group’s response to ideas. Overall, the research found that in group settings, people’s sense of the atmosphere influences their collective sense-making in decision-making.

Professor Jarzabkowski said: “We wanted to explore how people’s subconscious signals such as tone of voice, attitude, emotional interaction and body language can influence the views of others when making decisions.”

“Our research shows that strategy development is not just about making optimal decisions. The strategies that companies pursue are influenced by the mood of the people during strategy development – by the mood in the room.”

Professors Eric Knight and Jaco Lok of Macquarie Business School said: “We all know that atmosphere can affect how we feel. But its influence on the way we understand complex issues has not been systematically studied. That is why our study is so important and unique.”

Matthias Wenzel, Professor of Organizational Sciences at Leuphana University Lüneburg, said: “We often assume that there is a consensus or a common understanding in management decision-making. However, our research shows that the atmosphere in the room is what is common and affects the decisions made.”