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Adam Neumann’s extravagant behaviour cost WeWork millions.
Adam Neumann’s extravagant behaviour cost WeWork millions.

Opinion | A superstar leader is not always good for office and business growth

In corporate life, charismatic leaders have often caused as much harm as good

Everything else being equal, charisma is that special quality which sets apart a leader, and makes her truly inspire and motivate people. Charisma, though, is a double-edged sword. There are many examples of charismatic leaders who presided over and promoted a toxic work culture to bear this out.

The most recent example is, of course, Adam Neumann, the co-founder of WeWork, a company valued at $47 billion at one point, and tumbling to a fraction of that after a failed IPO. That was followed by stories about governance issues driven by Neumann’s arrogant and extravagant behaviour. But before it all came out, we loved the story of the brash startup co-founder selling a new way of working and living.

If a leader is self-centered or motivated by grandeur, it is easy to drive a firm in the wrong direction, and if the leader is charismatic, it takes far longer for the back story to come out.

In corporate life, charismatic leaders have often caused as much harm as good. This tends to happen because their excesses are ignored for far too long.

Then there’s Travis Kalanick of Uber. Susan Fowler’s blog unleashed a chain of events that resulted in his ouster. Before that, there was Kenneth Lay, the chairman of Enron, of whom Sherron Watkins, a former vice-president of the company and a high-profile whistleblower, said: “The ship has taken a hit in the bow and water is gushing in. The captain knows something is wrong, but he makes sure the band is still playing and the cocktail glasses are still full." Going by Watkins’ accounts, Enron’s top management was full of charismatic leaders whose personal magnetism kept people from asking too many questions.

It’s not just in the corporate world that this happens. It is common human psychology to exaggerate the accomplishments of charismatic heroes because we’re always looking for good stories. They make us believe in the power of accomplishment.

Science has these heroes too—Alexander Fleming, for one. He’s widely remembered and credited as the one who discovered penicillin. It is not common knowledge that he worked with Ernst Boris Chain and Howard Walter Florey on the discovery. In fact, the three shared the 1945 Nobel for medicine, but really, the one we remember is Fleming in white, peering down the microscope. We all like a good story.

Another good story is Isaac Newton under the apple tree. It’s a striking image of a moment of discovery that we all learn about as children. But he also said, “If I have seen further it is by standing on the shoulders of giants," referring to all those who had made discoveries before him and whose work had guided him.

Charismatic leaders tend to consciously create an aura around themselves, and build themselves a cult of sorts. When this happens, the damage they can cause is huge because no one is willing to call out wrong calls the leader makes. This is true of leaders in all walks of life, and not just the corporate world.

In Good To Great: Why Some Companies Make The Leap...And Others Don’t, author Jim Collins describes a leader with a powerful mixture of personal humility and indomitable will as a Level 5 Leader. She is incredibly ambitious, but her ambition is for the cause, the organization and its purpose, not herself. She would use every opportunity to focus a discussion on the firm and the cause, and firmly deflect any attempt to bring her centre stage. Therefore, you don’t get to read about Level 5 leaders. They are anonymous and steer clear from personal publicity.

A charismatic CEO can certainly mesmerize clients, users and other stakeholders in the short term, and that can drive revenue growth. It is, therefore, convenient for the board to go with the flow and play along. Silicon Valley startup Theranos is another case in point—an untested product based on dubious technology was positioned as the next medical wonder through a carefully choreographed fraud that rode on the charisma of its founder, Elizabeth Holmes, and endorsed by a highly regarded and influential board who never questioned her.

When charismatic leaders become all powerful, no checks and balances work until it is too late. It is, therefore, important for company boards and investors to recognize this dilemma that charismatic leaders can pose to the health of their firm and institutionalize strong governance mechanisms early on to ensure that the charisma is not channelized in the wrong direction. Governance mechanisms have not always prevented blowups on account of bad governance but the probability of preventing them is higher.

T.N. Hari is head of human resources at Bigbasket.com and adviser to several venture capital firms and startups. He is the co-author of Saying No To Jugaad: The Making Of BigBasket.

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