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Leadership Matters:  Values and Dysfunctional Dispositions

by Robert Hogan and Gordon Curphy
In the 1970s movie, “Dirty Harry”, Clint Eastwood plays Harry Callahan, an Inspector in the San Francisco police department who is widely admired by his co-workers for his courage, honesty, and professionalism. The movie’s sub-plot concerns how shabbily Callahan is treated by his superiors; they are depicted as shallow and opportunistic, more concerned about career advancement than running an effective organization or serving the public. They take credit for Callahan’s successes but alertly blame any problems on him. The movie ends with a disgusted Callahan throwing his police badge in a lake. This sub-plot is also a frequent theme in popular fiction, suggesting that being exploited and betrayed by one’s superiors is a common if not universal experience in working life.

Kaplan and DeVries, a Greensborough consulting firm, report that failure rates for today’s managers average about 50%, and failure rates for high potential managers average about 30%. These data reflect a long-standing condition. When we began studying leadership in the 1980s, we quickly discovered two things. First, the empirical literature on leadership effectiveness was tiny, inconclusive, and contained few practical suggestions. Second, the popular business literature defined leadership in terms of the top people in each organization, and characterized them in uncritically positive terms (Barbara Kellerman recently points out in HBR that, for the most part, this is still true). In an important 1985 paper, V. Jon Bentz, a retired HR executive from Sears, noted that over 50 % of the bright, ambitious, and socially skilled new managers hired at Sears subsequently failed; he also catalogued the reasons for their failure. Bentz’ paper was quickly followed by a report from the Center for Creative Leadership that replicated his findings with a different sample. These papers prompted us to study the causes of managerial failure because: (a) although managerial success is often hard to define, failure is easy to define; (b) the supply of failed managers is altogether adequate for research purposes; and (c) no one had ever studied leadership in this way.

This essay summarizes our findings regarding the causes of managerial failure, and offers some suggestions about how to minimize the problem. We can sort the causes into two large categories which concern values and dysfunctional dispositions.


Leadership and Values

Values are a person’s most important and enduring beliefs. Leaders have many different values; however, virtually all of them belong to one of ten categories. These categories can be found in Table One, and it is relatively easy to assess their importance. For example, many leaders in the health care industry endorse Altruism, whereas leaders in the financial services industry are committed to Commercial values. Political leaders are often driven by a need for Recognition, and military and religious leaders believe Tradition values are important.



Key Work Values

Table One: Key Work Values

Recognition: Wanting to stand out and be noticed, and dreaming of fame and success.
Power: Wanting to be successful, to make an impact, and create a legacy.  
Hedonism: Wanting to have fun and enjoy the fruits of one’s success.
Altruism: Wanting to help the needy and powerless and improve society.
Affiliation: Wanting to be part of a group and seeking social stimulation.
Tradition: Believing in family values and endorsing socially approved behavior.
Security: Wanting occupational and financial safety and avoiding risk.
Commerce: Wanting financial success and seeking business opportunities.
Aesthetics: Wanting to be stylish and fashionable, being concerned about appearances.
Science: Wanting to solve problems and make decisions based on data.

Leaders tend to behave in a manner consistent with their values—values determine what data they pay attention to, what problems they see as critical, how they solve those problems, and how they evaluate the effectiveness of their solutions. Leaders enjoy activities consistent with their values and avoid activities that are inconsistent. In addition, the consensual values of top leadership determine organizational culture.

Because we like people who have similar values and dislike those with different values, values also determine organizational “fit”. No matter how talented an individual may be, if his/her values are inconsistent with the culture, then he or she will sooner or later leave the organization. We worked with the marketing department of a large, multi-modal transportation company; the management group contained 11 men and one woman. In terms of the values in Table One, the men had high scores for Commerce and Power, and low scores for Aesthetics, Affiliation, and Hedonism. The woman, an Asian American with an MBA from Harvard, spoke 5 languages and was in charge of international marketing. She had high scores for Aesthetics, Affiliation, and Hedonism; although we thought she was the most talented person in the group, she lasted only six months in the job.
There is a second way in which values induce managerial failure. Some of the values in Table One, when taken to an extreme, can lead to reprehensible conduct. For example, managers as a group tend to have strong Power and Commerce values and place little importance on Altruism and Security. Strong Power and weak Security values are associated with energy, drive, risk-taking, and upward mobility—essential ingredients of a successful business career. On the other hand, strong Commerce and weak Altruism values are associated with greed and selfishness; when these tendencies are unchecked, they lead to the sort of corporate misbehavior that has been so visible in the news over the past few years. Bad values—greed and selfishness—are another way in which values contribute to managerial failure.

How to Fix the Values Problem
The problems associated with organizational fit reflect the fact that leaders tend to hire people with similar values, which means that good candidates with dissimilar values will not get hired. However, these people will question many of the assumptions, strategies, processes, and decisions of top management, which may be precisely what is needed for future progress. To fix the “fit” problem, companies must be willing to hire people with diverse values and then learn to act on those values. Companies whose leaders have diverse values will be slower to make decisions, but the decisions should ultimately yield better results than those made by leadership teams with homogenous values.

How can companies be protected from the problems associated with greed and selfishness? First, they need to determine what their corporate values really are by assessing the values of the top corporate leaders. If their values are aligned with the public values of the organization, then all is well. If not, then organizations will need strong codes of conduct and active Boards of Directors, because, if unchecked, top leaders will tend to act according to their own rather than the corporation’s values


Leadership and the Dark Side of Personality
There are two sides to personality—the bright side and the dark side. The bright side reflects the ways in which leaders act when they are at their best. Dark side personality traits interfere with a person’s ability to build a cohesive and goal oriented team. These tendencies appear when leaders are at their worst—during times of stress and crisis, or when they are otherwise distracted.

A list of eleven common dark side traits can be found in Table Two. Several features of these tendencies are worth noting. First, they often coexist with good social skills so that they are hard to detect during interviews; for example, people with Bold, Mischievous, and Colorful characteristics typically make a very positive impression. Second, these dark side tendencies can help people cope with stress. For example, Reserved people shut others out in order to focus during crises. Diligent people cope with stress by planning and micromanaging details. These are useful tendencies for individual contributors; in leaders, however, they alienate followers and destroy team work. Third, virtually everyone (including the present writers) has one or two of these tendencies. Fourth, as seen in Table Two, a moderate level of dark side tendencies promote leadership success. At the extreme, however, these tendencies erode trust and credibility others. As a way of making this discussion more concrete, we describe four examples of these dark side tendencies. Further examples can easily be found in any periodical covering business and politics.

Dark Side Personality Traits

Table Two: Dark Side Personality Traits

Excitable: Approaches new projects and people with energy and enthusiasm, becomes easily disappointed, then blows up—emotional fireworks.
Skeptical: Expects to be betrayed, reacts aggressively to real or imagined signs of betrayal, but is very smart about organizational politics.
Cautious: Overly concerned about making mistakes and being criticized; very slow to make decisions, but makes few foolish errors.
Reserved: Insensitive to social or emotional cues; remote, aloof, and communicates poorly, but handles negative feedback with ease.
Leisurely: Insists on working at own pace, resists requests for increased output, procrastinates, is always late, engages in aggression that is hard to detect, but has excellent social skills.
Bold: Arrogant, feels superior and entitled, claims more credit for success than is fair, blames failures on others, but is willing to take on daunting projects.
Mischievous: Enjoys risk, excitement, and testing the limits, ignores failure, is careless about commitments, but is very cool under pressure.
Colorful: Sociable, outgoing, lively, entertaining, seeks attention, is disruptive and easily distracted, but is bright and engaging.
Imaginative:

Eccentric thinking, impulsive decision making, unable to learn from bad choices, but is smart and visionary. 

Diligent: Micromanages others, won’t delegate, can’t prioritize, but is very hard working with unusually high standards of performance for self and others. 
Dutiful:

Overly concerned with pleasing superiors, poorly represents concerns of staff, but is an excellent organizational citizen.



Excitable
Excitable people are energetic, forceful, and intense; they manipulate others by yelling and intimidation. As managers, they make an initial dramatic impact on organizations, and then things begin to erode as the staff becomes disaffected. Al Dunlap, a burly and aggressive West Point graduate, improved the stock of four large American corporations—American Can, Lily Tulip, Crown Zellerbach, and Scott Paper Company—by ruthlessly cutting costs and driving sales; in so doing, he became known as "Chainsaw Al". When Dunlap was hired to turn around the Sunbeam Corporation in July, 1996, its shares went up 60%, to $16.50 per share, based on Wall Street's expectations of his performance.

At Sunbeam, he began by denouncing the former management as incompetent. He then hired an accounting firm to justify the cost reductions he wanted to make, and began drastically cutting staff and facilities. He took a tax write off worth $300 million, gave his major managers stock options, and then put "excruciating" pressure on them to increase sales.

In the first three quarters of 1997, Sunbeam’s earnings met or exceeded expectations and the stock hit a record high of $50 per share. In public, things looked rosy, but by early 1997, Dunlap’s management team was stressed to the breaking point. He gave them wildly unrealistic goals: double their total revenue, boost operating margins from 2.5% to 20%, and generate $600 million in new product sales in 12 months. When they didn’t meet these arbitrary targets, they were abused. Dunlap could be viciously profane and somewhat violent. Executives said he would throw papers or furniture, bang his hands on his desk, and shout so ferociously that a manager's hair would be blown in the breeze.

Senior managers began to quit. The rapid downsizing caused operational chaos and additional costs. Most departments and functions lacked the people to do their normal work. Plants that were needed to produce goods already sold to retailers were shut down; the surviving factories lacked the parts needed to make their products. Dunlap fired his IT group. Sunbeam then hired contract workers and people who were just fired at salaries higher than those of the original workers. Then Sunbeam tried to upgrade its computer systems with no backup. Computers were down for months, and clients such as Wal-Mart and Sears had to be invoiced manually. In July, 1997 an influential analyst downgraded the stock.

By the fourth quarter, the controller began using money from the $300 million restructuring fee to "create income". The pressure to meet unreachable financial goals even got to Dunlap who, in February, walked onto the golf course where he lived and assaulted a passer by. In March, 1998, an internal auditor resigned, complaining about a "lack of prudent, ethical behavior…in order to 'make numbers' for the company". On April 3rd, the chief of investor relations resigned. A Paine Webber analyst who had always deplored Dunlap's management practices downgraded the stock, which went into free fall. Dunlap announced a first quarter loss, and the stock promptly lost 25% of its value. Dunlap's hand picked board fired him on June 13th and shortly thereafter filed for bankruptcy protection. By midyear the stock had fallen from $53 to $6 dollars per share. The company lost $898 million in 1998, and Dunlap sued them for $5.3 million in severance pay.

Mischievous
Mischievous people are bright, charming, impulsive, and enjoy testing the limits and taking chances. Mischievous managers make a positive first impression because of their obvious intelligence, social skill, and daring. Mark Whitacre was a 32 year old whiz kid at Archer Daniels Midland (ADM). His charm and cleverness propelled him rapidly up through the organization and, at age 32, he became the head of the biotechnology division at ADM. In 2000, in conjunction with Tyson, Con-Agra, and some other international firms, he organized a global price-fixing scheme around a product called Lycene (which is used in animal feed). He also began working with the FBI on a sting operation, and for three years, Whitacre charmed his co-conspirators into talking about their price-fixing activities, which he recorded on tape. By “leading the witnesses”, he collected over 200 hours of wiretap and video information. However, while he was misleading his co-conspirators, he was also lying to the FBI, and embezzling $9.5 million from ADM. When the FBI learned of his embezzlement, they gave up on the case and went after Whitacre. Prior to the time that the case unraveled, however, Whitacre thought he should and would be promoted into the presidency of ADM, and he may well have been in line for the job.

Imaginative
Imaginative people are bright, interesting, creative problem solvers, whose unusual schemes and often grandiose visions of future realities attract a lot of attention. As managers, they make a strong initial impression based on their obvious intelligence and their striking strategic perspective. In time, however, they tend to lose credibility because few of their ideas work out.
Gerald Levin, the former CEO of Time Warner, describes himself as “a very strange man” who was given to discussing existentialist philosophy in the board room and dreaming of creative business mergers that would establish his place in the CEO Hall of Fame. After Levin joined the Time organization, he acknowledged plotting the downfall of his boss, Nick Nicholas, for 20 years. In 1990, he helped engineer a merger between Time and Warner Communications, which is generally seen as a poor deal for Time. He instigated a palace coup in 1992, and became CEO of Time. In an effort to compensate for the poorly advised merger with Warner Communications, Levin sold Time Warner to AOL in 2001 in one of the most catastrophic mergers in the history of American business, a deal that lost $200 billion in shareholder’s money. Levin resigned as CEO of AOL Time Warner in December, 2001. In his frequent interviews with biographers and journalists since 2001, Levin comes across as somewhat other worldly, preoccupied with philosophical abstractions, and concerned about his legacy as a CEO.

Diligent
Diligent people are driven, hard working, stubborn, and perfectionistic; as leaders they specialize in micro-management—they are unwilling to delegate, unable to prioritize, and have a powerful need for control. Michael Eisner has been the CEO of Disney for 20 years. During the first 10 years, the company was reasonably successful in a financial sense, but it was also characterized by nasty fights between Mr. Eisner and other senior executives. The president of Disney, Frank Wells, died about 10 years ago, and since then Disney’s profitability has declined significantly. Regardless of the stock price, however, Eisner has been one of the most highly compensated CEOs in the world. In 1993, Disney’s earnings (after an accounting change) fell 63 percent, but Eisner earned $203 million. In March, 2004, angered by the decline in profitability, Disney stockholders’ revolted and forced Eisner from the job as chairman, although he remained as CEO. At the present, Disney is faced with a hostile takeover from the Comcast corporation.

Under Michael Eisner, Disney has become known for its centralized control, top down management, and thorough going bureaucracy. This culture reflects the personality and values of the CEO: “Disney is known to be so centralized under Mr. Eisner, that no creative decision is too small for his consideration, whether it is viewing pilots for new television shows, selecting which animated characters to emphasize in a film…” or the color of the bumper cars in the theme parks. In addition, “Mr. Eisner’s combative style… has forced several talented executives to leave and lead to the recent nasty split with Steven Jobs and Pixar.”

How to Fix the Dark Side
As noted, dark side traits often coexist with strong social skills, which means that many people with covert but problematic tendencies get hired or promoted. There are several ways organizations can minimize these problems. First, they can use dark side assessments as part of their managerial selection or succession planning processes. These assessments are relatively inexpensive and easy to administer, and organizations need to know how people are likely to react under pressure. Similarly, leaders also need to be aware of their dark side tendencies. Providing leaders with insight about behaviors that may alienate their followers is one way to reduce these counterproductive tendencies.

Second, through coaching, leaders can learn how to cope with stress and minimize the impact of their counterproductive tendencies. However, because dark side tendencies are deeply ingrained habits, it takes a concerted effort to minimize these tendencies. In addition, the tendencies associated with some dark side traits can be very hard to coach—leaders with Skeptical, Cautious, and Leisurely tendencies fear change, see no reason to change, or say they will change when they have no intention of doing so.

Summing Up
This paper tries to advance the general understanding of leadership by approaching it in a different manner. Rather than focusing on managerial elites, the paper identifies the sources of some common problems which, when identified, can be remedied. Starting with the observation that the failure rate for promising new managers is about 50%, we point out that the source of these problems can be traced to two broad psychological causes. One cause concerns values, the other concerns dark side personality characteristics. Some values promote greedy and selfish behavior and get managers in trouble. Moreover, when a manager’s values are inconsistent with the corporate culture, he/she is certain to have problems. We next outline a taxonomy of personality characteristics that interfere with a manager’s ability to build and maintain a team. Finally, we offer some suggestions regarding how to minimize these very generic problems.

Gordy Curphy, Ph.D.
President, Curphy Consulting Corporation
1978 Graduate of the United States Air Force Academy
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