Sunday, September 10, 2006

Narcissistic CEOs

My doctoral advisor from a few years back, Don Hambrick, has -- it seems -- struck a nerve with some new research. With Arijit Chatterjee -- a doctoral student at Penn State University -- Don has written a new working paper (I don't believe it's been published yet) titled: It’s All About Me: Narcissistic CEOs and Their Effects on Company Strategy and Performance . Don always has had a gift for naming phenomena with colorful words and picking great paper titles.

I went on Don's and Arijit's websites to try and download the paper to read myself with no luck. However, Don was kind enough to send me a copy. To read it, go here. However, in the blogosphere, reading the actual paper before commenting is not required. At least one person read the paper (I hope): Francesco Guerrera in the Financial Times in an article a few weeks back titled "Forget the salary packages, look at the size of their egos." (For more coverage, see the Forbes article here, and the Economist's take here.)

The authors counted the number of times a CEO used the word "I" in their annual letters to shareholders; they looked at the length of their entries for their "Who's Who" bios; and they looked at the size of their photos in the annual reports. (You have to give Don and Arijit a 10 on originality for their measures.) All 3 positively predicted that these CEOs would take larger strategic risks. Risks can be successful and also not so successful. The point of the research is that bigger egos take bigger risks.

The comments in the blogs have been more negative than positive. Leslie Gaines-Ross called it "CEO Bashing." Richard Edelman also chides the professors and moreso the FT editor for urging CEOs to be bashful. He (and Ms. Gaines-Ross) are essentially saying that CEOs should always swing for the fences -- else, what great things would be accomplished in this world? Ian Griffin is more encouraging of the advice that CEOs should be wary of letting their egos get outsized. He offers up the CEO of BASF, Jurgen Hambrecht, as a better model of a CEO; more "conductor," less "rock star."

I think the flaw in the criticisms is that they equate the suggestion/advice of reigning in the egos as being tantamount to taking no risks. After all, who wants a Churchmouse CEO? I believe Don would be the first to say all CEOs must take risks. That's what they're hired to do: review alternatives and make strategic choices. Every choice or non-choice is a decision and risk. However, you can take risks with a sense of humility. It's the organization and team driving it that is the star -- not you. What's more, Don's research here, as well as research done by his proteges Syd Finkelstein and me have shown that "authentic" (read: humble and easy for others in the organization to relate to) leaders' organizations are more successful (with much less risk of failure) than "celebrity" leaders' organizations.

For every Carly, there will be a Mark Hurd to point to; for every Steve Jobs and Richard Branson (cowboys who went out and created empires), there will be a Michael Eisner and Al Dunlap. Take risks, change the world, but keep eating your lunch in the company cafeteria.

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Recruitomatic said...

Great post. Can't wait to read the paper. In the meantime...

Where does the concept of Servant Leadership fall in this analysis and to what extent can we measure "faith" in the same way as "ego" as an indicator of risk-taking?


Eric Jackson said...

It's been a while since I read the book, but -- from what I recall -- the concept of Servant Leadership appears to line up well with what I've been referring to as "Authentic Leadership."

I just got Don's paper and will post shortly, but I don't think you can equate "faith" and the way they measured "ego." How detailed your bio in Who's Who, how large your photo appears in the annual report; these don't correlate with the "faith" you have in the business. Someone could believe in the business as CEO, without ego.



Anonymous said...

If you believe this study is valid, then by logical extension, there is no reason to champion the cause of narcissistic investors such as Carl Icahn, who are not in it for anyone else.

The last thing companies like Motorola need to do is trade one set of leadership problems for another. Motorola's previous head of Mobile Devices Business, Ron Garriques, is a classic, textbook narcissist.

If you short Dell, the implosion will come soon enough as Garriques employs his canned approach of "#1 market share at any cost" and accelerates Dell's race to the bottom.

Narcissist leaders of all types are toxic to the people around them and across every level of the organization -- from the Board all the way to the bottom of the pyramid.

Reject narcissism everywhere!!!