CEOs Do Impact Performance, but Not the Way You Think

CEO narcissism impacts company strategy and performance. Donald Hambrick and Arijit Chatterlee, in a 2007 study, demonstrated that CEO narcissism influenced the degree of strategic dynamism, strategic grandiosity, extreme operating results and highly fluctuating results.

Narcissism consists of the four traits: 1) superiority/arrogance; 2) exploitation/entitlement; 3) self-absorption/self-admiration; 4) leadership/authority. (Emmons 1987 in Chatterjee & Hambrick 2007).

The study found that the more narcissistic the CEO, the more likely they were to rapidly change strategy (strategic dynamism) and to choose highly visible, risky strategies. The authors suggested that this was because a narcissist needs ongoing attention and congratulations for their actions.  These visible, bold, even risky strategies are more likely to result in either highly successful ventures or great failures because of their audacity. These ventures are “grandiose” in their vision. The authors measured the number, sized and relatedness of acquisitions as a measure of grandiosity.

The most interesting aspect of this study was the method used to measure narcissism. Authors selected 105 companies in the technology software and hardware industries from 1992 – 2004. They then analyzed annual reports for the number, size and composition of photos of the CEO. Additionally they considered the CEO’s visibility in company press releases, and CEO’s use of the pronouns “I and me” in press interviews. Finally they considered CEO cash and non-cash compensation as compared to the next highest paid individual in the firm.

Their study showed that even moderate increases in CEO narcissism are linked to more extremes and more fluctuating performance.  However, on average, narcissistic CEOs performed no better or worse than non-narcissistic CEOs, at least in terms of total share holder return.

The authors also controlled for organizational culture, finding that the CEOs in the sample who had changed companies maintained similar degrees of narcissism, while there appeared to be wide variation of CEO narcissism between successive CEOs at the within firms. This led the researchers to believe that it was the CEO and not the firm that was narcissistic.

As an investor, if you are looking for stable, reliable returns, you might want to consider the results of this study. While investing in a company managed by a narcissist may result in outrageously successful results, it may also result in stunning failures. Investors looking for stable consistent results may find this type of firm unattractive. It’s important to note that this study looked at a single industry. It may be possible that results might be different when looking at different industries.

In addition to extreme, risky and fluctuating performance, narcissistic CEOs can have a toxic impact on the culture of an organization, resulting in the loss of talented employees and the demoralization of those remaining. It’s worthwhile to consider the personality of the CEO when buying stock or considering employment at any company. It will tell you a lot.

Chatterjee, A. & Hambrick. D. (2007). It’s all About Me: Narcissistic Chief Executive Officers and Their Effect on Company Strategy and Performance. Administrative Sciences Quarterly. 52: 351-386.

Ego-Surfing and Narcissism

My new word of the week is “ego-surfing”.

Yesterday I was doing my annual google search on myself. I know that this sounds narcissistic in the extreme, but I do have a legitimate reason for doing this. Because so many people have had their reputations smirched or their identities stolen on the internet, I do a regular check to make sure that no one is saying untrue, nasty things about me.  Social media experts recommend that you monitor your web presence.

Purely by accident, I found a wonderful post about me from a former student. I was so excited that I showed a colleague, who promptly noted that I had been eg0-surfing. Which made me laugh, because, to a certain degree it is true. What started out as a reputation management exercise turned into an exercise in ego.

By way of attribution, according to Wikipedia (the source of all knowledge), the term ego-surfing was first coined in 1995.  A 2009 Study from the Pew Internet and American Life project shows that 57% of American adults have Googled themselves to “manage their reputation”.

The era of the internet has certainly changed the way we view ourselves. We have become much more conscious of how we are seen by others. Some evidence suggests that university age Facebook users who were higher in narcissism, lower in self-esteem also showed greater Facebook activity, and higher levels of self-promotion, where the person attempted to persuade others about their own positive qualities in photos, picture enhancement, positive adjectives and metaphorical quotes. (Mehdizadeh, 2010)

So go ahead and google yourself. Just remember, you can’t believe everything you read.

Mehdizadeh, S. (2010). Self-Presentation 2.0: Narcissism and Self-Esteem on Facebook. CyberPsychology, Behavior & Social Networking, 13(4), 357-364. doi:10.1089/cyber.2009.0257

Arrogance and the Workplace

We all know that we don’t like arrogant people, especially those we have to work with.  Until recently, there hasn’t been a lot of solid research on arrogance in the workplace.  A recent study on workplace arrogance (Johnson, et. al., 2010) suggests that higher levels of workplace arrogance are related to lower levels of self- and other-rated performance.  Higher levels of arrogance are also related to lower levels of intelligence and self-esteem.

The concept of arrogance is related to narcissism, as they both include an individual’s “exaggerated sense of superiority” (p. 405).  Narcissism is a broader concept, including the individual’s assessment of physical self (i.e. I like to look at myself in the mirror, or I’m hotter than others).  Arrogance “encompasses actions and language that exaggerate one’s own importance while also disparaging others.” (p. 406)    Recent studies (See Jean Twenge’s book, The Narcissism Epidemic), suggest that narcissism is on the rise in North American society.

So why should we worry about arrogance?  There are many reasons, but two are particularly significant.  First, arrogance makes collaboration and  group work difficult.  Today’s business world requires that we play together well, and we don’t, in part due to our individual arrogance.

Second, if we are arrogant, exaggerating our own abilities and importance, then it would seem to me that arrogance would make an individual less open to learning.  In order to learn, we need to be able to accept that we don’t know something, and we also need to be able to accept feedback and constructive criticism.  Research suggests that arrogant people are more sensitive to criticism, often rejecting feedback, limiting their ability to learn. 

 We need to be confident to be effective leaders.  However, there is a fine line between confidence and arrogance:

Someone who is confident knows who they are, and their ideas about themselves are built on information that is authentic or reality driven. Those who are arrogant are likely to take this confidence to a different level, as they overestimate who they are and what they can do, along with acting in ways that make those around them feel inferior. (p. 406)

Arrogance in the workplace has a number of negative consequences, ranging from lower performance to bullying behaviour.  Do you have a workplace culture that breeds arrogance or confidence?  Which one are you?

Source: Johnson, Russell E., et al, “Acting Superior but Actually Inferior?: Correlates and Consequences of Workplace Arrogance” Human Performance, 23:5, 403 — 427. 

Narcissim and Authenticity

Cover via Amazon

I think I finally understand my profound discomfort with the concept of authenticity in the context of leadership.

This past weekend, I read a book entitled “The Narcissism Epidemic” by Jean Twenge and Keith Campbell.  Narcissism is a state of excessive self-admiration, not to be confused with a healthy self-esteem.  Typically, narcissists have an over-inflated view of themselves, for example of their attractiveness and abilities.  They lack empathy and quality relationships with others. “This is the main difference between narcissists and someone merely high in self-esteem: The high self-esteem person who’s not a narcissist values relationships, but the narcissist does not.” (p. 19)

Twenge and Campbell noted research suggests that narcissism is not “really high self-esteem” and that narcissists are not merely victims of very low self-esteem. Studies also show that narcissists are not actually better/smarter/better looking than the rest of us.  Finally, narcissism is growing dramatically with a “30% increase in two decades”. Now one in four Americans in their 20s
“answered [the Narcissistic Personality Inventory) answered the majority of questions in the narcissistic direction.” (p. 30)

Narcissism is about self-admiration. The authenticity movement is a natural outcome of narcissism. Authenticity is about expressing one’s true self, so everyonelse will know how awesome you are.  The basic idea is that we will be happier if we can live they way we feel.  The problem with authenticity is that it is all about one’s self, not about those around us. Taken too far, authenticity is merely another way to express one’s self-importance.   In other words, being one’s authentic self becomes more important than the needs of others.

We say we want our leaders to be authentic. But I think we really want them to be sincere.  That is, that they believe in what they say and do. Too much focus on authenticity may be yet another form of narcissism in our celebrity, success obsessed culture.

We are increasingly having difficulty working in teams in an era where teamwork is essential.  The combination of increased narcissism and decreased empathy in our society may be contributing factors to this challenge. Perhaps we all need to start thinking of others, just a little bit more, and ourselves just a little bit less.