Week 7: Flawed Leadership

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Week 7 Flawed Leadership

• Housekeeping
• Final Questions on papers?
• News
• Theories
• Cognitive resources theory
• Incidence cost of flawed leadership
• Why they go astray
• Substitutes neutralizers
• Team Task

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There is a proliferation of new books on dealing
with difficult bosses

• Crazy bosses
• I hate my boss
• Dinosaur brains
• Surviving your boss
• Working for a loser
• Neanderthals at work
• Coping with difficult bosses
• Dealing with people you cant stand
• When smart people work for dumb bosses

Ok, so hes not a boss, but would you want to
work for him???
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Flawed Leadership What were they thinking?

• How is it that leaders who are initially selected
  for a position based on their competencies, may
  eventually fail dramatically? What are the causes
  of this downfall?
• How could "at risk" leaders be identified
  earlier? What mechanism would enable this? What
  kinds of interventions might be useful?
• What are the effects of a flawed leader on an
  organization (consider organizational culture as
  well as impact on performance)? Think of some
  examples of such events.

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• Premises
• cognitive resources refer to the leader's
  intelligence, ability, technical competence
• leaders make the best use of their cognitive
  resources under different situations
• stress is an important situational variable
• use of intelligence rationality is best under
  conditions of low stress and high follower
  support and competence
• use of prior experience/intuition is best under
  conditions of very high stress

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Backlash to CEO Pay

• During 2003 CEO compensation rose 9.1.
• Topping the list of the top paid CEOs is Reuben
  Mark, from Colgate-Palmolive, who earned a salary
  and bonus of 5.1 Million and long-term
  compensation of 136 Million, bringing his total
  pay to 141.1 Million.
• Rounding out the top five are
• Steven Jobs of Apple Computer (Total pay 74.8
  Million)
• George David of United Technologies (Total pay
  70.5 Million)
• Henry Silverman of Cendant (Total pay 54.4
  Million)
• Sanford Weill of Citigroup (Total pay 54.1
  Million).

What motivates Fortune 1000 CEOs? According to a
study of 208 Fortune 1000 CEOsFear - 43Power
- 22Money - 7(St. Louis Post-Dispatch,
03/26/2004)
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Trends

• In the past five years nearly 2/3 of all major
  companies
  worldwide replaced their CEOs
• 35 of all new executives entering a new position
  will fail (Center for Creative Leadership)
• 40 percent of all executives entering into new
  positions will either leave voluntarily, be
  terminated or receive an unsatisfactory review
  within 18 months (Manchester Partners
  International)
• 70 of CEO have considered quitting, and 35 of
  top executives would say no to CEO position
  (Burson-Marsteller CEO reputation study)
• The typical Fortune 500 company has had 2.3 CEOs
  in the last decade (Center for Executive Options)
  
• 15 of the problems a consultant was hired to
  solve were related to narcissistic managers.
• Hertzberg (1968), and more recently Hogan,
  Raskin, and Fazzini (1990) report that the base
  rate for flawed leadership is between 60-75 in
  organizations
• the failure rate of corporate executives in the
  US  from the 1980's-90's was about 50 (DeVries,
  1992).

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Trends contd

• Incompetent management has been estimated at 60
  in one large hospital (Shipper Wilson, 1991)
  and 50 in a large aerospace organization
  (Millikin-Davies, 1992).
• It was found that 25 of managers abuse employees
  enough that workers call in sick, slow down
  productivity, or change jobs.
• This costs industry and the economy up to 5
  billion annually
• Liability tends to follow such problems and 29
  states have upheld personal injury claims related
  to abuse of power.
• volatility increases following a CEO turnover,
  even for the most frequent type, when a CEO
  leaves voluntarily and is replaced by someone
  inside the firm
• Out of 253 chief executive departures, those that
  were involuntary were up by 70 compared to 2001.
  Performance-related terminations accounted for
  40 of all chief executive turnovers
  (Booze-Hamilton)
• See CEO Turnover http//www.ceogo.com/CEODEPARTUR
  ES/CEOTURNOVER/

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International CEOs
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The costs of failure can be astounding

• When Michael Ovitz left his post as president
  
  of Walt Disney Co. after 14 months, his
  severance
  package totaled an estimated 90
  million in cash and
  stock options.
• John R. Walter, ATT president and chief
  operating officer, left after nine months with an
  estimated severance package of 26 million,
• Top executive Gilbert F. Amelio exited Apple
  after 18 months with an estimated 7 million
  severance package
• Replacement costs can be as much as 150 percent
  of the departing persons salary
• Turnover of a senior executive within four years
  typically costs 1 to 10 million, including
  original and follow-up search and selection
  costs, plus buyout and outplacement

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Martha Stewart The Economic Cost of Scandal

• Martha Stewart Living Omnimedia
  has reported
  4th quarter loss of 2m
  due to high legal
  fees loss of sales
• Stewarts television network holiday special was
  cancelled resulting in TV revenues dropping from
  9.6m a year ago to 6.4m
• Shares have fallen from 19 to just over 9
• In 2003 Stewart reported that legal fees, lost
  business, lost opportunities due to the Imclone
  insider trading scandal had cost her over 700m
• A conviction could have resulted in 2m in fines
  30 years in prison if found guilty of all
  charges

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Vision is nice, but doers and team players are
more successful
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The Advantages of High Team Cohesion

• High esprit!
• Strong effort
• Unified vision
• Action oriented
• High goal setting
• Rapid decision making
• Team commitment and loyalty
• Member support encouragement

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Team Cohesion The level of commitment, loyalty,
and team spirit experienced by team
members Pressure Organizational culture and
situational conditions that create stress and
performance pressure on the team Flawed
Organizational Structures A lacking of
organizational and team procedures and controls
by which team processes and outcomes are
monitored Group Think Eight symptoms of
decreased decision making effectiveness Counter-m
easures Internal and external procedures to
monitor team processes and decisions in order to
reduce the risk of groupthink and promote
effective decision atmosphere
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Symptoms of GroupThink
Overestimation of Group 1. Illusion of
invulnerability 2. Inherent morality Close-minded
ness 3. Rationalization 4. Stereotypes of
outsiders Pressure to Uniformity 5.
Self-censorship 6. Direct pressure from group 7.
Mind guards 8. Illusion of unanimity
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When it hits the fan Consequences of
GroupThink--faulty decisions
1. Fail to adequately determine their objectives
and alternatives 2. Fail to adequately assess
the risks associated with group decisions 3.
Fail to cycle through discarded alternatives to
reexamine their worth after a majority of the
group discarded the alternative 4. Not seek
expert advice 5. Select and use only information
that supports their position and conclusions 6.
Does not make contingency plans in case their
decision and resulting actions fail
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Reducing or Preventing Groupthink

• Use scientific method--gather data, understand
  and
• explore before conclusions
• Brainstorm before discussing course of action
• People in power positions (leaders) should
  refrain from early opinions
• Invite outside experts--seek information that
  does not support preferred
• course
• Develop criteria for evaluating options against
• Assess risks, revenge effects, and regret
  analysis
• After initial solution, develop second solution
• Make contingency plans
• Devils advocate--Encourage members to raise
  objections concerns
• (challenge norms)
• Multiple Advocacy--subgroups make different
  proposals
• Have group be evaluated by persons separate from
  the leader
• Second chance decisions
• Have group members get feedback from
  constituents on tentative
• decision
• Develop multiple scenarios and contingencies for
  each scenario
• Nominal group technique and Delphi method

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1. Procrastination
2. Perfectionism
3. Type-A (workaholic)
4. Narcissism (self-centered)
5. Authoritarian
6. Low self confidence
7. Stress dumper (contagion)
8. Conflict avoidant
9. Need to be liked/accepted
10. Need to know everything
11. Need to be certain of everything
12. Chronic anger, abrasive, sarcastic, vengeful
13. Incompetent, "Peter Principle"
14. Insensitivity to needs and expectations of others
    
15. Cold, aloof, distant, arrogant
16. Betrayal of trust, break confidence
17. Unable to take strategic view (long term
    planning)
18. Unable to use staff effectively and build
    cohesive team
19. Over-dependent on advocate or mentor

Personal Traits of Failed Leaders
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Untying the Double-Bind
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Leadership Substitutes Neutralizers
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Cant hide poor leadership but sometimes you
also cant get rid of it
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Feasibility of change
The feasibility of changing a problematic
situation can be
difficult to determine, and there is not clear
formula for its
assessment. Here are some criteria that can be
used for consideration

• Will tampering/intervening with the situation
  make it worse?
• Will attempted intervention increase the
  resistance, stress, or punishment?
• Will it get better on its own SOON without
  intervention? (e.g., retirement, imminent
  transfer, health problems, legal issues, etc.)
• Will it take more effort and expense to change it
  than will be gained in benefit?
• Do you have "response-ability" to influence the
  conditions and outcome (e.g., right, legitimacy,
  authority)?
• Can such change be done within the constraints of
  time, money, safety, skills, effort,
  availability, support, etc?
• Will the probable amount of change due to the
  intervention be enough to reduce the problem
  effects?

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Team Task Case Analysis

1. Identify a familiar case for analysis and
   discussion
2. Use a theory to account for the case exactly how
   did the leader fail and why?
3. Use the theory to consider an intervention What
   could have been done to intervene early or late
   in this case to improve the outcome?
4. Evaluate the utility of the theory to account for
   this case