why leaders go astray

November 21, 2019

illustration by nilesh juvalekar

Our character is reflected by our character ‘habits’, and because how we treat others is a matter of habit, we can change. Habits can be unlearned, strengthened, acquired. Some people suddenly find the inspiration to make a dramatic change in their character habits. Others go about changing in a more gradual way. For some, this is very difficult—for others, it comes easy, said Fred Kiel in a July 2015 interview to Indian Management. True, humility, selflessness, and a sense of purpose are characteristics those who inhabit the corridors of power should invariably possess.

Every month—sometimes every week—there is a new scandal in business, or sometimes an old one resurfaces, like the issues around data protection at Facebook which do not seem to go away, or the ongoing investigation into corruption at FIFA, the international football body. Whenever this happens, the question is inevitably asked: why did not the leader do something about this, to stop it from happening? Or are they involved in the mess? Are they part of the problem, not part of the solution?

All too often, that is indeed the case. The leader has taken their hand off the tiller through neglect, or else has deliberately begun to steer the organization into dark places. Of course, leaders do not do these things alone. There will be others around them, who either fail to notice that the organization is going off course or similarly are determined to engage in corruption or other illegal and immoral activities to suit their own ends.

How do these leaders get where they are? How do the incompetent and the corrupt come to occupy positions of power in the first place? In some cases, they manage to persuade us that they are something other than what they seem; they pretend to be more competent, or more honest, or both, than they really are. In other cases, however, a leader may start off with the best of intentions and perform well for a time, before going off the rails. It is those leaders that I want to discuss now, the ones who start well but then go over to the dark side. What mindsets do they develop and what cultures do they create in order for this to happen?

arrogance: believing in one’s own brilliance

Morgen Witzel is a Management Historian, Author of 21 Books, and a Fellow of The Centre for Leadership Studies at The University of Exeter Business School.

Very often, success sows the seeds of failure. Leaders who rise quickly to the top, developing a glowing reputation for success, start believing their own publicity. They think they are bulletproof; they can do whatever they want, because ordinary rules do not apply to them. Kenneth Lay and Jeffrey Skillings, the disgraced former bosses of energy company Enron, fall into this category. Enron had been hugely successful, much admired by stock market analysts and business academics. Lay and Skillings thought they could do whatever they wanted and get away with it. A contemporary, Bernie Ebbers at Global Crossing, believed he had divine sanction to do as he wished; he could plunder his own company at will, because God would look out for him. (He was later sentenced to twenty-five years
in prison.)

Arrogance also sometimes leads to a view that the leader is always right and everyone else is wrong. They can behave however they wish, riding roughshod over anyone who disagrees with them. At Uber, Travis Kalanick developed a style that he called ‘principled confrontation’, which in fact just meant ‘confrontation’. Kalanick’s response when someone disagreed with him was captured on video when he began berating one of his own drivers who was protesting about low pay and poor working conditions. Even more unpleasantly, one of Kalanick’s executives tried to discredit a passenger who had made an allegation of sexual assault against an Uber driver by hacking into the woman’s medical records. Kalanick was finally forced to resign by his board of directors as he had become a liability to the company.

Our fears make us anxious to protect what we have; we look at the risks of confronting the unknown, or the other, and decide it is safer to leave things as they are.

Kalanick, Lay, and Skillings were all talented people, but they let their arrogance get the better of them. Had they been more humble, they might well have avoided the scandals that befell them, and their businesses would have prospered.

fear: the inability to confront the world

It may sound strange, but some of the leaders who fail to prevent bad things happening in their organizations do not take action because they are paralysed with fright. Our fears make us anxious to protect what we have; we look at the risks of confronting the unknown, or the other, and decide it is safer to leave things as they are. This of course just increases the risk we already face, but most of us are capable of burying that knowledge and carrying on, hoping the status quo will hold out just a little bit longer; even though it is blindingly obvious that the tide is coming in, and the sand castles we have built to protect us are about to dissolve away.

People in high office sometimes talk about impostor syndrome, the fear that at any moment someone could confront you and demand to know by what right you hold your post and give orders to other people, and you will not be able to answer. I know this feeling well—I suffer from it myself—but in my experience, the people with impostor syndrome are not the problem. They know their weaknesses and they behave with humility, most of the time. The really fearful leaders are the ones who will not confront their fears until it is too late, and then lash out.

Richard Fuld, the CEO and chairman of the now defunct bank Lehman Brothers, fits the mould very well. Fuld was a domineering leader who deliberately surrounded himself with people who would not challenge him, largely because they did not have enough skill or information to do so; famously, only two of the independent directors of Lehman Brothers had prior banking experience. In 2007 when it became clear that the bank was in trouble, Fuld became even more aggressive, threatening on one occasion to metaphorically ‘rip the heart out’ of short-sellers who were dragging Lehman’s share price down.

Sometimes, the desire for domination comes from listening to what others tell us. If enough people tell us we are wonderful, for long enough, there is a danger we might end up believing it.

greed: more and more of everything

This can mean personal greed, which is certainly a motive in corruption cases where bosses take kickbacks or bribes. Demands for ludicrously high salaries are also a symptom of greed, and show that the leader is probably putting their own interests ahead of those of the organisation; a fixation on salary and bonuses for oneself means one is probably not thinking about other people as much as one should. Here again, an element of humility is necessary, and also selflessness. It is the organisation that matters most, not
the leader.

Greed can also take the form of ambition. A little ambition is a good thing; too much is a pill the organisation can choke on. Between 1994 and 2002, Dutch supermarket group Royal Ahold spent more than €20 billion on acquisitions around the world, especially in the Americas. Its ambition was to become the largest supermarket group in the world, for no particular reason other than that it wanted to be big. For a time it looked like Royal Ahold might succeed, even though integration costs for the major acquisitions were far higher than forecast and currency devaluation in South America had cut deeply into profits.

Then a venture in Argentina fell apart when a local partner defaulted on debts. Other American operations slid into loss; executives at one subsidiary tried to cover up their losses through a clumsy accounting fraud, which was discovered almost at once. Unable to sustain mounting losses, Royal Ahold collapsed. Its CEO and CFO both lost their jobs and the company was the subject of criminal investigations. Measured, managed growth, based on a reasonable calculation of risk, could have helped Royal Ahold reach its objectives. Instead, its leaders got greedy.

lust for power: the desire to dominate

Some leaders are motivated primarily by the desire to dominate other people. Again, they are not always born this way; sometimes, the desire for domination comes from listening to what others tell us. If enough people tell us we are wonderful, for long enough, there is a danger we might end up believing it.

In their famous article, Narcissistic Leadership, Seth Rosenthal and Todd Pittinsky describe how some leaders ‘are principally motivated by their own egomaniacal needs and beliefs, superseding the needs and interests of the constituents they lead’.1 They make a distinction between charismatic leadership, which motivates and inspires other people to do well for themselves, and narcissistic leadership, which exploit people in order to gather more power for the leader.

The worst example of this in recent times is undoubtedly the American film mogul Harvey Weinstein. At the height of his powers, he was involved with some of the most successful films in history. Its subsidiaries had produced 277 films, generating more than $2 billion in revenue and winning 28 Academy Awards. But Weinstein began to believe in his own publicity. He found that he enjoyed power, particularly the power he had over young and vulnerable actors and actresses. At time of writing, more than eighty women have accused him of sexual harassment, assault, and rape. Criminal investigations have been opened in the USA and Britain. Although it should be stressed that none of the allegations have so far come to trial, Weinstein’s behavior is consistent with that of a narcissistic seeker after power.

People take their cue from what the leader says and does; the leader sets expectations, and defines the culture.

The result, of course, was disaster for the company and for Weinstein himself. His board of directors forced him out of the company, but it was too late. Former partners and backers no longer returned the company’s phone calls. In March 2018 the company filed for bankruptcy, and its assets were later bought by a private equity company for a fraction of their former value.

lack of purpose: cynicism and betrayal

In his book Why Smart Executives Fail, Sidney Finkelstein refers to ‘zombie companies’, ones that no longer have a sense of purpose and have forgotten why they exist. Leaders no longer lead. Customer focus drifts away; staff and employees see the company as something that owes them a living rather than an entity with a purpose and vision. Once that happens, the company is on a downward spiral that can only have one end.

There are some who believe that cynicism in business is the natural order of things. Luke Johnson, a British entrepreneur and investor, argued in an article in Financial Times some years ago that ‘only the cynical survive’. He went on to argue that ‘lying is endemic in business’. For example, he says, in the cosmetics and beauty trade, ‘customers implicitly conspire with the purveyors of such products: they ‘want’ to believe that make-up will give them the appearance of being more glamorous and desirable’.2

Among the businesses in which Johnson invested was a bakery chain, Patisserie Valerie, which had a market capitalisation of over £500 million. Johnson himself served as chairman of the board. In October 2018 the board became aware of a very large financial fraud, so large that the company itself could no longer continue trading. The chief financial officer was suspended, and Johnson ploughed £10 million of his own money into the company in order to keep it afloat, but it was to no avail; in January 2019 Patissierie Valerie went into administration.

I am not saying that Johnson’s endorsement of cynicism led to the fall of Patisserie Valerie. What I am saying is that if you make public pronouncements in favor of lying, it cannot come as any great surprise if your staff attempt to defraud you. People take their cue from what the leader says and does; the leader sets expectations, and defines the culture. Cynical leaders tend to create cynical cultures, and the things we do and say have consequences.
Leaders need to remember that with power comes responsibility, and also a moral choice. They can use their power to aggrandize themselves and get what they want at the expense of others, or they can use it for the benefit other people. In their book Kindness in Leadership, Gay Haskins and Mike Thomas make a powerful case for doing the latter. They argue that ‘kindness’, which they define as caring for other people and putting their needs and wants before our own, is not just a social virtue; it is an important building block of society. Empathy, understanding, warmth towards other people are essential if society is to function; without them, it would be every man and woman for themselves and society would fall apart.

Along with kindness, we also need humility, selflessness and a sense of purpose. Can we find leaders who exhibit these characteristics, rather than ambitious, selfish, cynical people who too often inhabit the corridors of power today? It seems we must. The future of the world could depend on it.

 

 

1 Seth A. Rosenthal and Todd L. Pittinsky, ‘Narcissistic Leadership’, The Leadership Quarterly 17 (2006), pp. 629.
2 Luke Johnson, ‘Lies, Damned Lies and Running a Business’, Financial Times, http://www.ft.com/cms/s/0/364f2924-47e1-11e4-ac9f-00144feab7de.html#axzz3FH4CKRWx