Sunday, September 27, 2015

Reining in megalomaniacal bosses

Power corrupts and absolute power corrupts absolutely. We've all heard Lord Acton's famous dictum. And we have seen it happening all the time, whether in politics or in a corporation. The trillion dollar question is: what do we do about it?

Many, if not most, management gurus think sermonising or indoctrination is the answer. Exhort managers to live up to "values". Train leaders to be  "caring". Tell those at the top that being "selfless' or "service-oriented" is the secret of true leadership. And so on. And how do we do this? Well, by talking about the "lessons in leadership" to be learnt from Gandhi or Mandel. Or the Gita and the Mahabharata.

In other words, the emphasis is on turning people at the top or those headed for the top into evolved souls. The entire leadership industry thrives on this sort of stuff. It's amazing how popular leadership programmes are. I guess that's because they generate a 'feel-good' factor in participants at least for a short while before reality catches up.

It should apparent to the meanest intelligence that this is a load of rubbish. If sermons could have created a better world, we should have had paradise on earth by now. I point out in my recent book, Rethinc: what's broke at today's corporations and how to fix it, that the whole idea that people get corrupted after they get into positions of power is a mistaken one. Would-be leaders have all the hallmarks of corruption before they get into positions of power. Leadership is acquired through the single-minded and ruthless pursuit of self-interest. It's acquired by discarding "values", setting aside compunction or guilt and focusing on the big prize that people get to the top (leaving aside a few exceptions). So, to expect leaders of corporations to be something different, once they assume power, is sheer delusion.

As Schumpeter puts it in a recent column in the Economist, there is a Donald Trump in every leader, meaning that egomania is to be expected at the top. The answer to that is not try to change leaders into something different- that would require some feat of genetic engineering. It is to take it as a given that leaders will have a dark side to their personalities and to create checks and balances that limit the damage they can do.

One common way is to split the post of chairman and CEO (and to make sure it's not the CEO who brings the chairman on board). Another, which I propose in my book, is to have independent directors appointed by different constituents: institutional investors, large lenders, employees, etc. A third is to foster dissent within the organisation by actively rewarding people who speak up. (The CEO may not like this but the board must find ways to do it). I propose the use of prediction markets as a way of letting diverse views influence decisions instead of having the big boss take all of them.

I also think term limits are a great idea. The US, by law, limits presidents to two terms. It doesn't matter how wonderfully a president has performed or how young he is.(Presidents in recent years have faded into retirement even before reaching their sixties). IIMA, by convention, limits the director to one term of five years.

Do not for a moment think that leaders can be changed into wonderfully balanced, compassionate people. Take it as a given that those at the top will tend to abuse their powers. Find ways to limit such abuse.


K.R.Srivarahan said...

One wonders whether Ethics is teachable as a subject. Assuming it is, the follow-up question is 'Is Ethics worth teaching?'

Consider the pragmatic views of Jeffrey Pfeffer, the author of 'Leadership BS: Fixing Workplaces and Careers One Truth at a Time'. Says he (as quoted in Time):

"An almost infinite number of recent books, blogs and seminars on leadership equate being efficient with being virtuous, arguing that traits like authenticity, modesty and concern for others are paramount. Meanwhile, Donald Trump leads the race for the Republican nomination, and the world’s most lauded business leaders include Jeff Bezos, Steve Jobs, Elon Musk and many others who display few, if any, of these prescribed qualities. What gives?
In essence, we’re confusing good stories with good advice. The most cited example comes by way of Jim Collins, whose 2001 book Good to Great included a study of so-called Level 5 leaders–successful executives who were both driven and demure. But while these tactics may have worked for the small group of leaders Collins studied, they’re exceptions, not rules. The vast majority of research shows that narcissism, rather than modesty, predicts being selected for and surviving in leadership roles.
Of course, this won’t come as a surprise to anyone who’s read Machiavelli’s The Prince–or the New York Times piece published on its 500th anniversary, “Why Machiavelli Still Matters,” which draws from centuries of history to conclude that “following virtue often leads to … ruin … whereas pursuing what appears to be vice results in security and well-being.” Sometimes, the best bosses have to lie and manipulate to save money and jobs. Often, they have to disregard concern for others. These truths may not be as inspiring as the latest wave of leadership fables, but they’re backed by social science and knowledge of contemporary organizations–and they’re likelier to help people lead."

A responsible teacher aims at enhancing the prospects of his / her students. If being ethical is a proven handicap in the workplace, the teacher is bound to doubt the relevance of ethics in the curriculum. It is now easy to understand why IIMs do not get into ethical quicksand. Like individuals, institutions also prefer to avoid cognitive dissonance.

T T Ram Mohan said...

Mr Srivarahan, I entirely agree that the teaching of ethics does introduce dissonance in students... they can the conflict between the reality and the sermons read to them. And, of course, Pfeffer is dead right about leadership in the corporate world.
IIMs do teach ethics, by the way


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