Searching for a Corporate Saviour 8/10

Part 7.

Crowning Napoleon: The Making of the Charismatic Candidate

  • In pre-investor capitalism times almost all CEOs spent all their time on the company’s affairs and not on self-promotion on TV, in the press and through autobiographies.

  • Now Boards are looking for CEOs with the charisma (i.e. an elusive trait allowing CEOs to energize the lethargic or sceptical employees and lead them to reach the company’s true potential). And also to create a sense of urgency / burning platform / anything creating anxiety in the company, but not investors and business media.

  • Some entries for the BS Bingo: “chemistry”, “executive presence”, “articulation”, “stature”, and “change agent”. There are widely and conveniently used terms that can’t be precisely defined. But they are supposed to describe the person who will overthrow convention.

  • The candidates who don’t possess these lovely traits are singled out as unsuitable. [MK: yours truly, being quite modest, experienced it firsthand in 2010 when being interviewed for a software company’s CEO role.]

  • Some Directors even think that the charisma is inherited, crafted during the early formative years and can’t be developed later on [MK: do I hear ‘old boys club’?“. Also, there used to be one failed Austrian artist who took this stuff way too seriously. Just saying.]

  • Some Directors (and many others) also cite body language as a selection criteria. It’s B.S. folks, and it’s bad for ya © George Carlin.

  • In real life, maintaining the charisma of a leader is bloody hard if we take longer than one minute to look at his/her actions on the job.

  • Business press loves the “overcoming” component of the overall “coming of age” story of the leader: bad physique, stuttering, dyslexia, etc., which makes a good opening chapter in one’s biography.

  • In fact, the stories of overcoming tell more about their consumers rather than their subjects.

The Social and Cultural Dimensions of Charisma

  • Charismatic leadership is based not on tradition or rules, but on a superior ability to solve certain problems.

  • Principle 1. All organizations are dependent on some kind of controlling authority, which must be seen as legitimate to keep itself intact. In 19th century it was the founder authority, then in the managerial capitalism days – the CEO authority granted by the Board. And in the shareholder capitalism days the shift is towards the charismatic authority.

  • Max Weber: charisma is mostly defined by its social context, i.e. a social phenomenon. Society’s faith in a charismatic leader comes not from the individual, but from a particular set of social relations and the cultural context within which those relationships are embedded.

  • A leader isn’t charismatic unless others recognize the claim to authority.

  • Charismatic claims must always be reaffirmed by the followers. The way to do it is distributing benefits or demonstrating special abilities; once it’s gone —> loyalty and legitimacy disappear.

  • In the past charisma was a byproduct of status or some demonstration of being in the service of a higher power (i.e. god). So successful founders might’ve been blessed by higher powers, too.

  • The myth of a self-made individual is a social-control mechanism, not a reality, especially when more and more opportunities are closing for people.

  • An instance of this myth is a new leader-saviour of a troubled company. The saviour must reenable the loyalty, commitment and identification of the employees substantially in a way of organized religion.

The Structural Antecedents to Charismatic Succession

  • Charismatic leaders tend to arise in the middle of acute social disruptions. Under stressful conditions people tend to affiliate with others and be members of groups with strong leaders.

  • Large corporations are seemingly rational, but they are most prone to hiring CEOs based on personality and not objective factors.

  • In management capitalism CEOs started as management trainees working their way up and accumulating seniority and admin expertise in the process.

External succession as break from routine

  • In the past succession was planned and candidates were developed over the years with the Board watching over them.

  • Clear rules about CEO transition was a guarantee that the transition will be smooth.

  • Inability of a Board to name a successor fast to outsiders means that: a) no insider is good enough; and b) the depth of the company’s problems is bigger than it wants to admit.

  • The longer it takes to find a replacement – the more factionalized the Board becomes and hence the top candidate’s trait would be the ability to create order.

The effects of poor performance

  • Crisis in a firm (usually – repeated record of poor performance and a resulting discontent) is a trigger to turn to charismatic leadership. Especially if it’s rooted in the structural industry changes.

  • Crisis creates new demands on performance and induce feelings of insecurity and anxiety among Directors.

  • A charismatic leader creates a vision to solve organizational problems and motivates people to act on it. At least in theory, as the vision can be completely off. But at least it brings hope (illusion of possibility) for a short period of time and is being listened to due to their outsider status. Insiders (who are more knowledgeable about the firm) are considered pessimists and lacking vision.

  • Or they may articulate the company’s mission and bring attention to the facts and activities out of line with the mission.

  • Sometimes companies without the proper course of action refuse to return money to shareholders (via dividends or share buybacks) and rather look for a CEO who can implement the unrealistic strategy.

  • In crisis, groups tend to abdicate their responsibility and transfer control to others (a closer circle of execs and the CEO).

  • The imagined solutions to complex problems of underperforming companies are simplistic and are matched against a reduced skillset of a would-be CEO. And many candidates indistinguishably possess these similar reduced skillsets.

Part 9.