David Winsborough: Casting light on the dark side

Boards are naturally interested in the topic of leadership. That good leadership leads to effective organisational performance is almost axiomatic.

The author of From Good to Great, Jim Collins, was surprised to find that leadership was one of the key factors that drove companies to become great.

But as anyone lower down the organisation knows, organisations tend to become reflections of their top managers, as borne out by several studies.

McKinsey's recent global survey of directors found boards are taking a stronger interest in developing their organisations' ethics and leadership capabilities.

Boards do this because they intuitively understand that the attributes and peculiarities of a leader have greater impact with seniority - senior managers have far greater power to turn their intentions into reality.

Thus poor leadership is also of critical concern to boards. Bad leaders not only destroy morale, they can destroy value and even bring companies down.

Consider the case of "Chainsaw" Al Dunlap, who won fame and fortune on Wall Street by rescuing troubled companies.

Seventeen organisations felt his touch, including American Can, Lily Tulip, Crown Zellerbach and Scott Paper Company. Ruthlessly cutting costs and driving sales, he became known as "Chainsaw Al" for his brutal management style. When he was hired to turn around Sunbeam in July 1996, the shares went up 60 per cent based on Wall Street's expectations of his performance.

At Sunbeam he denounced former management as incompetent and began making drastic cuts in staff and facilities. In the first three quarters of 1997, Sunbeam's earnings exceeded expectations and the stock hit a record high.

In public, things looked rosy, but behind the scenes, performance was rapidly deteriorating. Dunlap's management team was given wildly unrealistic goals: to double total revenue, boost operating margins from 2.5 per cent to 20 per cent and generate US$600 million ($860 million) in new product sales in 12 months.

When targets weren't met, Dunlap turned profane and aggressive, throwing papers or furniture, banging his desk and shouting. By mid-year the stock had plunged, the company made a huge loss in 1998 and Dunlap was fired.

Dunlap, it turns out, was a pro at window dressing troubled businesses. He pumped up earnings so that he and his backers could score quick profits from lucrative stock deals and the eventual sale of the company. As Dunlap shows, the more discretion leaders have, the more their leadership style will reflect who they are.

Boards should note two important points: the personalities of the leaders they hire are consequential, and the amount of discretion they delegate to leaders moderates the influence of personality.

Barbara Kellerman, a research director at Harvard University's Kennedy School of Government, notes that bad leaders are more similar to good leaders than they are different. This is to say that like good leaders, bad leaders are characterised by traits such as intelligence, a high level of energy, a strong drive for power and achievement, decisiveness, and determination.

She concludes that the "personality approach" to leadership, derided in recent years as simplistic and outdated, is in fact more powerful than we're now disposed to admit.

One of the differentiators between good and bad leaders is popularly known as emotional intelligence. This is a simple idea that refers to the extent to which individuals are emotionally self-aware, are able to contain their own impulses and emotions, manage stress, detect others' emotions and act on others' emotions.

Emotionally literate leaders perform better than those whose mental landscape is volatile, or who are seized by a grandiose sense of their own importance. However, Kellerman's point is that the good and the bad look the same.

One noted researcher, Professor Robert Hogan, describes two sides to personality. The bright side of personality concerns one's public reputation - showing the stereotypical ways in which leaders act on a day-to-day basis. Thus some leaders are strategic, charismatic, and outspoken, whereas others are more tactical, structured and humble. But Hogan also describes the dark side of personality.

Dark side personality traits are counterproductive behaviours that interfere with a leader's ability to build cohesive, goal-oriented teams.

These tendencies are most apparent during times of stress, when focusing on task accomplishment, multitasking, dealing with tight deadlines, or in a crisis. Hogan's 11 traits are not forms of mental illness; they are flawed interpersonal strategies - the flip side of emotional intelligence, if you will (see box).

Each behaviour pattern rests on a particular interpersonal strategy: gaining security by intimidating others; winning recognition through flirtation and seduction; and securing approval by becoming indispensable.

For individual contributors, these tendencies were often successful coping strategies. But as leaders, these same tendencies generally alienate followers and destroy teamwork.

The Institute of Directors' four dimensions for CEO evaluation are useful to boards in developing an integrated hiring, development, performance management and succession planning process.

The criteria used to hire new leaders should be the same as those used to develop, promote and reward existing leaders.

The Future: A specialist assessment process (like the Hogan Dark Side Assessment) can highlight potential derailment factors for boards. These tools are highly predictive of future behaviour.

The Past: What does this person's career reveal about them? What have been their career drivers?

Organisational Performance: Evaluate the sustainability of the candidate's past performance - have results held up? Did they develop talent beneath them?

Individual Behaviour: Boards should actively discuss plans to mitigate the dark side characteristics of CEOs and openly manage leader development.

Dark side personality traits

* Excitable: Dramatic mood swings, emotional outbursts, explosive tempers, unpredictable moods, and taking offence when things don't go well. These leaders are anxious and unhappy and make no effort to hide their feelings.

* Sceptical: An extreme mistrust of others. These leaders think others are after their jobs, are constantly on the lookout for incidents of disloyalty, and will retaliate if they believe they have been wronged.

* Cautious: An unrealistic fear of making "dumb" mistakes. These leaders lack self-confidence, do everything possible to avoid surprises and not get into trouble, and play to not make mistakes rather than win.

* Reserved: A tendency to be painfully objective and to not care about others' feelings. These leaders come across as mean, distant and aloof, and tend to manipulate others by withholding information.

* Bold: A tendency to take on too much, overestimate one's skills, and underestimate the time and resources needed to get tasks completed. These narcissistic leaders often feel entitled, have difficulty sharing credit, reinterpret data to fit their own world view and do not learn from failure.

* Leisurely: A tendency to overtly agree with others requests, but showing irritation to the request by not turning in tasks on time or completed. These passive-aggressive leaders have good social skills but are covertly resentful of requests made by others.

* Mischievous: A tendency to push limits, lie and break rules. These leaders engage in organisationally delinquent behaviours just to see if they can get away with it.

* Colourful: An unhealthy need to be the centre of attention. These high-maintenance leaders think they are something special, and the sole purpose of others is to tell them how important or attractive they are.

* Imaginative: These eccentric, offbeat, self-absorbed leaders are a fount of ideas - many of which are ungrounded in reality. Direct reports often question the judgment of these types of leaders.

* Diligent: A strong need to be meticulous, precise and orderly. These perfectionistic leaders need to do everything well, cannot prioritise or delegate and flounder in ambiguous situations.

* Dutiful: Reluctant to "rock the boat" and have a powerful need to please superiors. They have perfected the art of strategic sucking up and never learned to stand up for their staff or say no to requests from superiors.

* David Winsborough is chairman of Performance Profiles, an Auckland company specialising in psychometric assessment. This article first appeared in Boardroom - the official magazine of the NZ Institute of Directors.