​

SUCCESSFUL MANAGERS are often heralded for being charismatic leaders who inspire their employees with a sense of loyalty, commitment, and drive towards achieving the company’s objectives. These corporate leaders are often held directly responsible for their organizations’ profits and growth, and they are sometimes likened to “management gurus” both in and outside their organizations. While on the surface these leaders may seem to warrant much of the admiration and at least some of the high-flying salaries they receive, there is a potential danger in such leadership styles of which not everyone is aware. Charismatic leaders are prone to narcissism, which can have devastating consequences for organizations.

A clinically defined personality disorder, narcissism is broadly defined as a grandiose sense of self importance and entitlement for personal greatness together with a lack of concern for others. More specifically, narcissists can be characterized as having an exaggerated sense of their achievements and talents, expecting to be admired and recognized as superior, being preoccupied with fantasies of success, power, and brilliance. Narcissists often believe they are special and unique, expect favorable treatment and obedience, are arrogant and haughty, and lack empathy for others.

Risks

While certainly not all charismatic leaders are narcissists in the true clinical sense, some researchers believe that a focus on profit above all else and competitive corporate cultures may promote narcissistic beliefs and behaviors. In the workplace, narcissistic leaders may exhibit significantly negative behaviors, such as being preoccupied with power struggles and manipulating behaviors, taking public credit for their achievements but not taking personal responsibility for their failures, demanding discipline and obedience from coworkers, having a tendency towards outbursts of rage, especially when contradicted or criticized, speaking inappropriately or condescendingly to others, and being insensitive and abusive to their coworkers and staff.

As a result, narcissists are often difficult people to work with and can be a source of great stress and frustration to members of an organization. Perhaps more importantly, however, is the idea that narcissistic beliefs and behaviors may be responsible for costly organizational losses, and they may even lead to criminal behaviors. When executives take out personal loans against their companies to support expensive hobbies without regard to how that will affect others or the corporation itself, for example, that may be driven in part by narcissistic attitudes. Furthermore, when operating in a narcissistic organizational culture, in which employees blindly condone their managers’ actions, very few employees would even perceive these behaviors to be wrong and fewer still would dare to file complaints.

Narcissistic executives’ sense of entitlement and inflated sense of power make them feel as if the rules don’t apply to them, and they do not feel bound by corporate or legal regulations. It is due to this blatant sense of entitlement that many acts of fraud and corporate thefts are committed without the perpetrators even troubling to cover their tracks. According to Jay Conger, a professor of leadership studies at Claremont McKenna College in California, undesirable behaviors by narcissistic executives tend to increase during times of market euphoria, when the upward business cycle gives executives a lot to claim credit for and the cash inflows can cover a multitude of sins.

A narcissist’s deviant behaviors may become significantly more pronounced in the midst of organizational crises, such as falling revenues or increasing debts, because the narcissist’s ego is directly threatened. In such cases, the narcissistic executive will do anything he or she can to restore their personal image of success, even resorting to crimes such as fraud, embezzlement, or exploitation to do so. It is in these situations where narcissism becomes especially malignant.

According to Granville King, a professor of communication studies at Indiana University Southeast, narcissistic leaders may affect an organization’s ability to prepare for, respond to, and learn from an organizational crisis, because of the leader’s chronic ego concerns and lack of empathy for others, his distorted assessment of his own abilities, and his reluctance to take advice or accept blame.

As a result, when faced with a crisis, according to King, the narcissistic leader will likely first try to alleviate his or her ego threats by discounting feedback and downplaying the situation. He will then set out to control, eliminate, or hide the crisis, rather than trying to confront and address it.

Solutions

Companies can help reduce the risk of narcissistic behavior by using structured assessments in the hiring process, maintaining a strong ethical corporate culture, and by monitoring employee performance in day-to-day activities.

Hiring. Avoiding the dangers of such behavior begins during the hiring process. Organizations using standardized psychological assessments during the hiring process stand a better chance of preventing the employment of individuals who are at risk for engaging in dishonest work behaviors in the first place. Some of the most effective types of assessments are known as integrity tests, which have gained in popularity in recent decades.

Integrity tests try to assess personality traits, such as hostility and thrill seeking, which a company may want to filter out as well as positive traits, such as honesty and humility, which a company may want to find in job candidates.

Screening out job applicants with a predilection for egotistical behavior can help avoid problems before they occur. Other preemployment assessments that can help companies avoid hiring individuals with these tendencies include behavioral interviews and reference checks, which inquire about specific work experiences and past behaviors.

Many organizations already conduct such assessments for low- to mid-level employees. However, they are not always carried out for senior leadership roles. Even when such tests are given to executives, the tests do not look for egotistical tendencies. To address that lack, combinations of personality traits should be examined.

Corporate culture. Due to the absence of widely used assessments to specifically identify these problems and to the fine line between narcissism and positive characteristics, such as charisma and motivation, these individuals not only get hired, but they are also actively recruited. Thus, the question is how can management go about creating a moral, ethical, and transparent organizational culture that will help to hold the worst aspects of those tendencies in check.

Ethical company cultures can be partially facilitated by embracing national laws requiring accounting oversight and complying with good governance regulations, such as the Sarbanes-Oxley Act of 2002. However, the most effective intervention comes from an organization’s own internal initiatives.

The company needs a strong code of ethics that is widely disseminated and consistently endorsed by management at all levels. Employees should be required to attend ethics training programs, and they should know that adherence to the company’s code of ethics will be rewarded while violations will not be tolerated. In addition, whistleblowing policies and ethics hotlines should be encouraged.

An internal code of ethics can be helpful in restraining a narcissistic sales manager who may want to reward himself in unauthorized ways, such as billing his personal expenses to the company. A well-defined code of ethics and training program in the company would send a clear message to both the manager and his subordinates that such behaviors are not to be tolerated and that evidence of any such behaviors should be reported immediately. As a result, any such behaviors that do occur will be identified as the exception rather than the norm, and the person will ultimately be sanctioned, which will help prevent such behaviors from proliferating and degrading the culture of the company.

Performance appraisals. Another way to encourage honest behavior is to conduct performance appraisals by soliciting opinions from all groups that managers work with, including direct and indirect reports, colleagues, subordinates, and even customers, in a process popularly known as 360 degree appraisals. The important element, however, is that such appraisals should include performance ratings that are related to specific ethical behaviors. Beyond gaining critical insight to managers’ individual behaviors, ethics appraisals such as these send a strong message to the entire organization as to what’s really important to the company and what won’t be tolerated.

An example of this is a manager with narcissistic tendencies, who is consistently rude and abusive to his staff. Even if this manager produces excellent results at work, he likely does so at some greater cost to the company in terms of other staff issues, and his own successes should not outweigh that. Appraisals from his subordinates and colleagues would probably reveal his poor interpersonal skills and allow the organization to take the appropriate measures against him before he causes further damage.

Another component is to have structured exit interviews for all employees leaving the company. These can be an extremely informative resource for learning about the deviant or unconventional work habits of those with whom they have worked.

While self-confidence and charisma are both important qualities for successful leaders, when these qualities are found in the extreme, in the form of narcissism, they can become dangerous. To avoid that problem, companies should ensure accountability at the executive level, coupled with good preemployment screening and a strong ethics program. These factors can help reduce the devastating effects of narcissistic leadership in the workplace.

Saul Fine is vice president of research and development with Midot, Ltd. He is a chartered industrial psychologist and an expert in the area of selection and assessment.

Ishayau Horowitz is president and founder of Midot, Ltd.