Dysfunctional Leaders can create Corporate Tragedies

Many managers will recall the problems faced whilst working for difficult bosses, leaving them with disturbing memories that refuse to go away. The role of leadership in organisational success has been widely acknowledged and extensively studied, which in turn has driven the development of several models and theories on the issue. Leadership is perceived as a critical ingredient of organisational success and several biographies and autobiographies of successful leaders are available in the public domain.

Comparatively lesser effort has been made to examine poor, negative and dysfunctional leadership in modern organisations and their impact upon organisational performance, employees and society. The failure of Enron, WorldCom and Lehman Brothers are striking examples of poor and dysfunctional leadership and underline the need to study this aspect of leadership in depth.

Dysfunctional Behaviour

Dysfunctional behaviour can result in harm or intend to bring harm to organisations, stakeholders and employees. Dysfunctional leaders as individuals who inflict enduring and serious harm on individuals, groups, communities, organisations and even nations on account of their destructive behaviour and their leadership characteristics. Dysfunctional behaviour in a firm comprised repeated and systematic behaviour by a manager, supervisor or leaders that violated legitimate organisational interests by the sabotaging or undermining of organisational objectives, activities, effectiveness and resources, as well as the job satisfaction, wellbeing and motivation of employees. Research has shown that an astonishing 8 to 10% of leaders are dysfunctional. Their leadership can pose a significant threat to the achievement of organisational success, wellbeing and competitive advantage of modern business corporations.

Characteristics and Attributes of Dysfunctional Leadership

Several recent scams in recent years have brought dysfunctional and negative leadership into the public domain and ignited debate and research on the attributes, mind-sets and approaches of dysfunctional leaders. Effective and dysfunctional leaders can be distinguished by their mind-sets, i.e. the mental lenses that influence the ways in which people visualise and interpret the world around them. Dysfunctional leaders attune themselves to the mishandling of situations and the making of poor decisions, even as they believe they are taking the best possible course of action, they are driven by four specific mind-sets, i.e. the fixed mind-set, the closed mind-set, the prevention mind-set and the inward mind-set. Leaders with fixed mind-sets do not feel that they are capable of altering or enhancing their abilities, talents or skills. They seek validation and avoid failure and strive to be seen people with ability. Their team selection is often negative and they tend to choose people who appear to be inferior to them; they do not wish to be reminded of their ineptitude by juniors who are smarter than them or have strengths that are not available with them.

Leaders with closed mind-sets tend to shut themselves off from the concepts, ideas, recommendations and suggestions of other people, presuming they are right; their mind-set forces them to stubbornly hold on to their opinions as their mind-set is focused on being right. They view disagreement as a threat or an effort for undermining of their authority; this prompts them to become defensive and reject the suggestions of people disagreeing with them. Leaders with prevention mind-sets focus on not losing and try to ensure that nothing goes wrong; they avoid problems, refrain from taking risks and try to maintain the status quo. Their focus on micromanagement prevents them from understanding the big picture and taking necessary proactive decisions. Leaders with inward mind-sets consider their juniors and organisational employees as objects and unimportant to success. They prioritise on actions that are best for their own selves and tend to take, rather than share credit; they seek to safeguard their own selves before protecting their employees and organisations. The careful and impartial analysis of the mind-sets of senior organisational leaders and managers can be of use in the identification and predictability of dysfunctional behaviour.

The Behaviour of Dysfunctional Leaders

The behavioural set of a toxic leader has been termed as the dark side of leadership. Several types of behaviours or practices have been considered to be part of the dark side. Authoritarianism and narcissism were very common categories of dysfunctional leadership. Dysfunctional leadership was associated with abusive supervision, unpredictability and Machiavellianism. Authoritarianism has been very frequently observed in the business environment. Authoritarian leaders prefer to command and instruct other people on what to do and how to do it. They provide very little opportunity for employees for autonomy and personal creativity; they are inflexible and prefer to impose rigid hierarchical structures. Most of them are quick-tempered and show very little tolerance for failure. Requiring total obedience from subordinates they are quick to penalise offenders; refusing to interact with subordinates, they are deprived of inputs from employees; their decisions are thus made with inaccurate or incomplete information. Authoritarian leaders prefer to use force, rather than influence or inspiration to run their organisations. The organisations they run develop cultures of fear, rigidity, inflexibility and intolerance to failure. Whilst such leaders sometimes have loyal supporter groups on account of their psychological needs for father figures and are able to achieve short-term wins, they often dismantle organisations in the long run, lose good quality talent and bring about organisational decline.

Narcissism is one of the worst types of non-pathological human behaviour (Post, 1993). Narcissists admire their own selves and show little concern for opinions of other people. They are frequently blinded by their egocentricity and their self-imposed glamour, which causes them to lose touch with reality and others. The need for admiration and power, rather than their concern for their institution and their constituents. The actions of narcissistic leaders increase focus on glamour rather than on results and execution; they constantly take credit for the success of others and blame others for failure. They are defensive and intolerant; researchers feel narcissism to be an extreme form of self-esteem and potentially dangerous for organisations.

Abusive supervision includes sustained hostile verbal and non-verbal behaviour; whilst it has been described as a type of authoritarian behaviour and is frequently used by authoritarian managers and supervisors, it is also manifested in the form of retaliation, bullying and organisational injustice.
Whilst most research on dysfunctional leadership stresses that dysfunctional leaders will regularly engage, many leaders, in reality, swing inconsistently between behavioural traits and moods, making it difficult for juniors to react in specific ways. Ambiguity and confusion are created when dysfunctional leaders send inconsistent messages. It becomes difficult in such circumstances to prioritise tasks and drives suboptimal performance and efficiency.

Machiavellianism constitutes devious, exploitative, manipulative and aggressive behaviour that is adopted for the achievement of organisational or personal objectives. The ends are more important than the means for such leaders and they pursue their goals intensely, even if they have to act in illegal, immoral or unethical ways. Such leaders do not care for rules or traditions and frequently display narcissist and authoritarian behaviour.

It is evident that dysfunctional can result in a range of adverse organisational consequences of varying degrees. Such behaviour can particularly result in employee stress, reduction of motivation, job dissatisfaction, attrition and loss of organisational talent.

Impact of Dysfunctional Leadership

Dysfunctional leaders can impact organisations negatively, making them less efficient, less effective and underperforming, compared to their peers. Dysfunctional leaders tend to be disconnected and distant from their organisations. Relying upon their close circles for making decisions, they lose their connection with the actual state of affairs. The absence of inputs from employees leads to difficulties in understanding customer needs and priorities and inevitably in wrong decisions. With risks or initiatives being avoided, creativity and innovation is limited and the risks of stagnation and delays in adapting to changing trends increase.

Dysfunctional leaders promote cultures of self-promotion, conversations with hidden agendas and artificial success, which drives the diffusion of organisational corruption, malice, hostility, greed and collusion and the disappearance of fairness and equity; employees feel emotionally drained, undervalued, oppressed and constantly under threat. The firm gets an unhealthy working environment, characterised by lack of collaboration and trust amongst members.

Enron suffered from high levels of dysfunctional leadership; the organisation’s earnings were overstated by several hundred million dollars and most of the top executives were prosecuted for fraud. Top Enron executives displayed high levels of Machiavellian behaviour, overstating organisational profits for years and selling their company stock before the organisational collapse. Employees accordingly lost jobs and their life savings. The Enron leadership was characterised by extreme ambition, arrogance, lack of integrity and reckless disregard for their actions. The executives displayed various dysfunctional personal characteristics associated with destructive leaders. Several of the Enron executives engaged in decisions to achieve their personal goals of profit maximisation with very low concern for the interests of other stakeholders.

The collapse of Lehman Brothers was driven by extreme dysfunctional leadership, displayed by the CEO Richard Fuld. Fuld was extremely aggressive and ready to take big risks without considering the interests of shareholders and employees. His decisions led to high leverage and unsustainably high levels of debt. He was known to be an authoritative leader who ruled by intimidation and even brutality. He disregarded the opinions of his senior managers; his authoritarianism, narcissism and solo management style served him poorly, making him miscalculate the risks faced by Lehman and to its collapse. The cases of Enron and Lehman Brothers starkly expose the dangerous consequences of dysfunctional leadership for business organisations. Suitable and timely interventions and the bringing about of effective leadership changes in these organisations could have prevented extensive losses to organisations, shareholders and employees.

Conclusions and Recommendations

It is estimated that at least 10% of contemporary organisations suffer from dysfunctional leadership. Dysfunctional leaders display specific attributes like authoritarianism, narcissism and Machiavellianism, which cuts them off from their organisations and results in significant cultural problems, wrong decisions, underperformance and even organisational failure.

Organisational managements, especially the Board of Directors must take specific steps for spotting the symptoms of dysfunctional leadership, including dictatorial attitudes, personal agendas, inefficient resource utilisation, lack of collaboration, low productivity, morale reduction and high levels of organisational stress. The board should ensure that the CEO makes use of independent and qualified advisors, anonymous feedback surveys, adequate scorecards and high levels of participative management. There should be high focus on the development of companywide teams, communication, education and the building of consensus on strategy. The board must furthermore act with firmness if they feel that the leadership is dysfunctional; a new management team should be brought in if the existing leadership cannot change itself for the better.

The Board of Directors has a strong role to play in the prevention of dysfunctional leadership.

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