In a series of narcissism studies, Professor Alex Frino, Dean of the Macquarie School of Management, concluded that "there was a clear correlation between the level of CEO narcissism and the company’s use of ‘earnings management’ – a technique which takes advantage of the flexibility in accounting rules to inflate profit figures.”[i]
The more narcissistic a CEO, the more likely it was that the company’s share price would fail to keep up with the market. In contrast to this, the companies with the ten least narcissistic CEOs in Australia’s top 100 companies, more than doubled the performance of the most narcissistic CEOs.
In a previous blog, The Failure of Success, we looked at what happens when there is an unhealthy over-emphasis on competency at the expense of character in leading organizations. There is certainly justification for ensuring that competency should be skills or knowledge-based and character-based.
Alexandre Havard believes character is the driving force behind leaders identifying what the organization needs, not the other way around. For example, when leaders are ‘secure’ in themselves they are not threatened by the need to hire staff who are more competent in certain areas than they are.[ii]
A leader’s character engages and empowers people. It gives leaders the capacity and strength to act. It doesn’t take the place of professional competency, but helps to drive and develop competencies that are needed, which means recruiting the best people with the right skills and character to get the job done.
Stephen M. R. Covey addresses ‘trust’ as another critical dimension of character and its relationship to performance. To overcome the perception that character is 'soft' or ambiguous he wrote The Speed of Trust in an attempt to qualify how trust makes a measurable difference to the bottom-line. He came up with the formula that said, 'when trust is high, speed is up, cost is down.' The inverse is also true, ‘when trust is low, speed is low, cost is high.’[iii]
Although at times it may seem difficult to quantify exactly how the character of leaders increases organizational performance, we do know that when it is absent, organizations rapidly deteriorate and perform below what is expected.
Not all CEOs are narcissistic, but there is a link between narcissistic CEOs and poorer organizational results. Below are some questions to help you reflect on the type of leader you are as you drive for results –
[i] http://www.afr.com/p/narcissistic_ceos_should_reflect_dUGaGgVgbDwfS67U6ccjDN, 17 December 2014.
[ii] Alexandré Havard, Virtuous Leadership: An Agenda for Personal Excellence (New York: Scepter Publications, 2007).
[iii] Stephen M. R. Covey, The Speed of Trust: The One Thing That Changes Everything (New York: Free Press, 2006), 13.