Negative side of Charismatic leadership

Charismatic business leaders like Enron’s Jeffery Skilling, GE’s Jack Welch, Tyco’s Dennis Kozlowski, Southwest Air’s Herb Kelleher, Disney’s Michael Eisner, WorldCom’s Bernie Ebbers and HealthSouth’s Richard Scrushy became no less of a celebrity than Shaquille O’Neal Madonna. Every company wanted a charismatic CEO. And to attract these people, they were given unprecedented autonomy and resources. They had private jets at their beck and call, use of $30 million penthouses, interest free loans dot buy beach houses and artwork, security staffs provided by their companies, and similar benefits befitting royalty. One study showed that charismatic CEOs were able to use their charisma to leverage higher salaries even when their performance was mediocre.

Unfortunately, charismatic leaders who are larger-than-life don’t necessarily act in the best interests of their organizations. Many of these leaders used their power to remake their companies in their own image. These leaders often completely blurred the boundary separating their personal interests from their organization’s interest. At its worst, the perils of this ego-driven charisma are leaders who allow their self interest and personal goals to override the goals of the organization. Intolerant of criticism; they surround themselves with ‘yes’ people who are rewarded for pleasing the leader and create a climate where people are afraid to question or challenge the king or queen when they think he or she is making a mistake. The results at companies such as Enron, Tyco, WorldCom, and HealthSouth were leaders who recklessly used organizational resources for their personal benefit and executives who broke laws and crossed ethical lines to generate financial numbers that temporarily inflated stock process and allowed leaders to cash in millions of dollars in stock options.

A study of 29 companies that went from good to great(their cumulative stock returns were al at least three times better that the general Stock Market over 15 years) found an absence of ego driven charismatic leaders. Although the leaders of these firms were fiercely ambitious and driven, their ambition was directed toward their company rather than the sleeve. They generated extraordinary results, but little fanfare or hoopla. They took responsibility for mistakes and poor results and gave credit for successes to other people. They prided themselves on developing strong leaders inside the firm who could direct the company to greater heights after they were gone. These individuals have been called level 5 leaders because they have four basic leadership qualities – individual capability, team skills, managerial competence, and the ability to stimulate others to high performance plus a fifth dimensions a paradoxical blend of personal humility and professional will. Level-5 leaders channel their ego needs away from themselves and into the goal of building a great company. So while level-5 leaders are highly effective, they tend to be people you’ve never heard of and who get little notoriety in the business press – people like OrinSmith at Starbucks, KristineMcDivitt of Patagonia, John Whitehead of Goldman Sachs, and Brennan of Vanguard. This study is important because it confirms that leaders don’t necessarily need to be charismatic to be effective especially where charisma is enmeshed with an outsized ego.

Finally charisma can reach beyond the walls of the workplace. And because of their power to captivate others, charismatic leaders can be very dangerous. Some of the most oppressive leaders in history were highly charismatic. Consider Hitler. He was the leader of the Nazi Party and responsible for policies that resulted in the Holocaust and the deaths of approximately 6 million Jews. Robespierre was also considered charismatic. He has been credited as one of the leaders of the French Revolution and the Reign of terror. In fact, he often used the guillotine to control the country and get rid of his political enemies. Cuts are also often headed by charismatic leaders. For example, Jim Ones—the founder of the People’s Temple church convinced more than 900 of his followers to commit suicide by drinking poison. And Charles Manson – the leader of The Family – convinced his followers to commit mass murder. And, more recently, Osama bin Laden inspired his followers to sacrifice their lives, and the lives of thousands of others, in the name of religion.

We don’t mean to suggest that charismatic leadership isn’t effective. Overall its effectiveness is well supported. The point is a charismatic leader isn’t always the answer. Yes an organization with a charismatic leader at the helm is more likely to be successful but that success depends to some extent on the situation and on the leader’s vision. Some charismatic leaders like Hitler are all successful at convincing their followers to pursue a vision that can be disastrous.

Now that you know more about charismatic leadership, are you wondering if you have what it takes to join the ranks of charismatic leaders? The Self Assessment features will tell you.

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