He’s a toughie. A visionary business genius, who will lead the company to success through trial and tribulation. Sturdy, quick, and assured. Exceptional! Responsibilities that come with being a CEO take skill, self-reliance, and risk tolerance. Also, social skills come in handy when reaching for the top, as others wouldn’t be convinced otherwise. Power and success can be intoxicating. What if your boss is an arrogant bragger – in total and utter hubris?
Hubris becomes the joke when someone starts talking about themselves in third person singular, acts self-importantly, isolates themselves into the corner office, or begins basking in the limelight. We all know the king of the castle -type, right?
What if your boss is an arrogant bragger – in total and utter hubris?
Hubris can be an incredibly satisfying state of affairs for a leader. However, from the company standpoint, things aren’t quite so rosy. In the worst case, an impulsive, stubborn CEO with an ego that knows no bounds can destroy the entire business, create a culture of fear and silence, and drive away talented employees.
In other words, hubris can turn out very expensive. It’s not the problem of one or two, especially in the case of a show-off in a deciding role. Leaders have a lot of formal and informal power. Yet hubris can also prove useful.
Don Hambrick is a professor in strategic management at Penn State University in the US and one of the world’s most renowned and respected scholars. His studies on the hubris and narcissism of CEOs are classics in the field.
“CEOs who are in hubris and strongly narcissistic take risks and show bravery. Narcissists revel in others admiring their daring moves. Our studies show that strongly narcissistic leaders in the pharmaceutical industry are keener to get involved in biotechnology”, says professor Hambrick.
Hubris can get you out of a tough spot because omnipotent hubris leaders won’t ever doubt themselves.
According to Pekka Mattila, Group Managing Director of Aalto University Executive Education and Professor specialized in leadership, hubris can prove useful in a tricky situation.
Hubris can get you out of a tough spot because omnipotent hubris leaders won’t ever doubt themselves.”
“Instead of getting worried, a hubris leader will just push through. That’s when a miracle can happen. There a plenty of examples from military history of an army moving to attack despite retreating seeming like the only option. The attack has resulted in a surprise success.”
Successful or not, a hubris leader does increase the company s risks manifold.
Hubris is defined as excessive self-confidence and arrogance. In studying strategic leadership, analysis of an executive’s personality and possible hubris creates an understanding of why companies function in a certain way. What leads to success or failure?
In his book Peilejä johtamiseen (Engl.transl. Leadership Mirrors) published in the spring by Alma Talent, Pekka Mattila provides self-reflection tools for leaders.
“Too often, management is examined separately from leadership and especially from the leader’s character. Often a system-focused perspective of this type results in a clinical outcome: management would be just fine without awkward human factors and incidents”, outlines Mattila in the introduction to his book. In Mattila’s view, leaders and their personalities cannot be separated from the managed organization and its destiny.
Too often, management is examined separately from leadership and especially from the leader’s character.”
Timo Vuori, Assistant Professor of Strategic Management at Aalto University, researches psychological dynamics in leadership. He brings a psychological perspective to leadership research that takes human factors and their impacts into account, which Mattila mentions.
“We have rational models and are aware of the right procedures, yet these are rarely followed. Why is that? An understanding of psychological dynamics helps in planning functional strategies.”
Also, professor Don Hambrick explores the impact of a leader’s character and personality on the way strategies are formulated and implemented.
“I’ve always been intrigued by the impact of human factors on strategy. Major strategic decisions involve uncertainty and noise. That’s why the leader’s personal interpretation of the situation has such a big impact.”
Hambrick’s studies on the hubris and narcissism of CEOs are the most renowned in the field. In this case, narcissism doesn’t refer to a personality disorder, but a characteristic we all have. It’s not an illness.
“Hubris isn’t a fixed personality trait but can manifest itself in different situations and stages of life. Hubris is defined by the situation and personality. It is heightened by social praise and recent successes”, defines Hambrick.
Persona plays an important role especially in a situation with excessive information available.”
Not all people with strong narcissistic traits enter hubris, but they are predisposed to it. As a starting point, Hambrick sees that decision-making offers a vast range of ambiguous stimuli to leaders, and their interpretation is influenced by their persona, i.e. values, experience and personality. Persona plays an important role especially in a situation with excessive information available, unclear causal connection, and lack of administration or regulation to restrict decision-making. Impatient leaders who see themselves as omnipotent think they do not need to find out the facts but make decisions based on their own interpretation.
Hambrick has noticed a wave of colorful CEOs in companies in the US during the 2000s. As classic examples, he mentions Lee Iacocca at the helm of Ford and Chrysler, Jack Welch from General Electric, and Steve Jobs from Apple. “They all score high for narcissistic tendencies in our research. That’s what sparked my interest in researching narcissism. We are surrounded by strongly narcissistic and hubristic people”, says Hambrick.
“Steve Jobs may have aimed for hubris, but his product development was meticulous. Perfectionism in product development kept his hubris in check”, Timo Vuori comments on the legendary leader.
“Of course Trump surpasses all classifications.”, says Hambrick. “He even collects magazine covers of himself. But it will be interesting to see whether he is praised or loathed afterwards, and how effective his measures are. It will influence the course of future leaders a great deal.” Trump’s conduct as US president doesn’t come as a surprise to Hambrick, who had already rated Trump as strongly narcissistic. “Yet I would never have foreseen this (Trump becoming president). On the other hand, more and more countries seem to be electing similar personalities as leaders.”
Pekka Mattila agrees with Hambrick: strong, extroverted leaders are in vogue right now. Revealing insecurities and sharing doubts doesn’t take you to the very top. “Risk avoiders with a pessimistic streak do not match today’s leadership ideals. There used to be more room for different personalities. Now an ideal from the startup world prevails”, says Mattila.
A warning sign is when critical voices in your company are ridiculed or even demonized.”
Mattila feels that fast-paced industries that do not adhere to conventional business principles or think they don’t apply are in greater risk of hubris. “In these types of fields, it’s easy to play down criticism, even if justified by the figures.”
How to detect hubris?
“A warning sign is when critical voices in your company are ridiculed or even demonized, divisions are made into us and them, and leaders surround themselves with likeminded types”, Pekka Mattila lists.
According to Jyrki Wallenius, Professor Emeritus at Aalto University, who has specialized in management systems, there’s a fine line between healthy self-confidence and hubris. CEOs are typically expected to demonstrate “leadership”: determination, vision, and fast moves. “Leaders have managed to rise up the ladder to increasing responsibility. They’ve been to fine schools and done well. This often results in a healthy dose of self-confidence. Leaders are also recruited based on their vision. They come inbuilt with a high level of self-reliance.”
Hubris leaders are believed to take too many risks. The definition is somewhat problematic, as it requires “knowing what the right amount of risk is”. Hindsight isn’t a good tool here. “In hubris, leaders fail to focus on the dangers involved in a project and tend to neglect any plan B”, describes Wallenius.
Hubris can also take the form of impatience, self-centeredness, and a disregard for rules. Hubris leaders have a tendency to leave a trail of dodgy accounts behind, as they think rules do not apply. One warning sign is when a leader refuses to listen to others.
Hubris leaders have a tendency to leave a trail of dodgy accounts behind, as they think rules do not apply.”
In their classic study in the field, Don Hambrick and Mathew Hayward, Professor in the Department of Management at Monash University in the US, analyze the impacts of hubris on premiums paid for acquisitions. A premium refers to an acquirer offering a higher sum over market value in order to entice the potential seller. The average premium in acquisitions is around 20 to 30 percent.
The study by Hambrick and Hayward is founded on a basic notion of self-known as core self-evaluation (CSE). This involves self-esteem, self-efficacy, locus of control, and emotional balance. It’s more or less built in the core of a person and relatively stable. Hambrick and Hayward calculated how much CEOs with a high CSE went over market value in premiums in acquisitions. A hyper-CSE is linked to hubris.
On average, the premiums were overpriced by 47 percent, sometimes even by 100 percent. The ratio reflects the CEO’s interpretation of how much more value he or she would add to the company than at the time of acquisition. In other words, highly confident, hubristic CEOs have a more fervent belief in their miracle-making abilities than acquirers on the whole. Hambrick and Hayward went on to examine the company’s performance under the CEO and how much the CEO was praised in the media. They also compared the CEO’s salary to the second highest paid executive in the sector. The assumption was that the three factors reflect the CEO’s self-sufficiency. There was a strong connection with high premiums in acquisitions. The scholars deduced that the decisions of the CEOs were in all likelihood influenced by “how full of themselves they were”.
It seems that the more self-confidence the CEO has, the bigger the strategic moves made by the organization, which in turn increases risks.”
After the analysis, Hambrick and Hayward listed how a CEO’s over-confidence could impact the company’s strategy. It seems that the more self-confidence the CEO has, the bigger the strategic moves made by the organization, which in turn increases risks. It also seems that highly self-confident CEOs will not easily budge from their chosen strategy, which may become a problem, as the company’s future is rarely determined by clear options.
Major decisions are always made in many-sided situations. There is no shortage of information and noise. As hubris leaders believe in their own invincibility and omnipotence, they don t feel the need to thoroughly examine the issue at hand. Their personal views and character can have an exceptional impact on a major turn for the company. Hubris leaders make decisions based on less knowledge than those who think of themselves less highly. Hubris leaders do not worry about failing. They believe they can conquer any trouble and repair all problems.
Hubris leaders are quick to make decisions. Their way of making decisions can become the company’s way, as organizations have a habit of repeating the same decision-making process. The role of knowledge and preparation decrease in the company as a whole, which increases risk. The more self-sufficient CEOs are, the more their companies deviate from the strategies of other companies in the field.
They believe they can conquer any trouble and repair all problems.”
Bluntly speaking, a hubris leader’s choices and decisions either lead to an epic success or major loss for the company.
In another study, Hambrick and research colleague Aritjit Chatterjee examined 111 CEOs in the IT industry in 1992-2004. They noticed that the size of the CEO’s photograph in annual reports, prominence in press releases, and use of first-person singular pronouns in interviews correlated with “strategic dynamism and grandiosity, as well as the number of acquisitions”. These personalities were also connected with fluctuating and extreme organizational performance. CEOs with exaggerated self-reliance not only made more acquisitions but acquired more companies outside their own industry. Fusions aiming at diversification can be unsuccessful, so it’s a tell-tale sign of the CEO’s high level of self-confidence.
Another marker of self-confident leaders is holding on to share options granted by the company as close to the expiry date as possible, even if profitable already in good time, as the leaders assume they can get the value to rise right to the end. Hubris leaders rather pay in cash than exchange shares, as they think their company shares are undervalued.
In other words, the hubris of an executive can have repercussions far and wide: on structure, corporate culture, and job satisfaction of employees. Owners come under its spell, too, and the conclusion is clear-cut and raw: hubris leaders are more likely to destroy the company than create growth.
Whenever the macro environment invites or needs quantum moves, there’s a demand for narcissists.”
Don Hambrick sees the leader’s personality and situation resulting in hubris. Hubris is not a permanent condition. The current situation seems to favor hubris personalities. “Whenever the macro environment invites or needs quantum (large-scale) moves, there’s a demand for narcissists. Their behavior and style are appreciated.”
The need for big moves and risks can be explained by rapid technological advancements, globalization, and disruption. As old structures break, vast opportunities become available for the daring. In times of uncertainty, people have a need for strong, trailblazing leaders, both in society at large and in the corporate world. It all supports the ideal of determined, visionary leaders.
According to Hambrick, American CEOs in the 50s, 60s, and 70s were gray and boring. The dream leader of the time was factual and serious, focusing fully on managing the company. The leader’s personality wasn’t scrutinized by media – it simply wasn’t the done thing. All in all, the CEO’s predominant image was very different to today’s. Plainly speaking, today’s ideal leader is an extroverted show person, who takes care of the company and navigates publicity. A true leader is both public material and takes an active public role for instance by tweeting. Media and social media publicity have increased and accelerated in recent decades.
Studies indicate that especially positive publicity feeds hubris. It’s just human – people who do not enjoy attention are a rare occurrence. “(Hubris) leaders may give interviews to journalists who praise them”, Timo Vuori mentions as an example. This brings them more admiration.
Today’s ideal leader is an extroverted show person, who takes care of the company and navigates publicity.”
Leaders can be faced with expectations of messiah-like qualities. It is tempting to think of this as a sign of our times, but that’s not necessarily true.
“Think how pharaohs and Roman emperors were admired. People have a desire to put heroes on a pedestal, and social media is a place for continuously basking in the limelight.”
Hubris would be cut short without the situation mentioned by Hambrick: surrounding people and structures. Hubris leaders cause a stir because they are given the space to do it.
“Quite often leaders are hired for their vision. Solid self-confidence is involved, and if they have already made a decision on what to do, they won’t look at other options. In the worst case, they’ll surround themselves with more likeminded people”, says Jyrki Wallenius.
Christian Stadler, Professor of Strategic Management at Warwick Business School, U.K., has studied companies that have enjoyed long-term success. Typically the CEOs have a diverse, multifaceted network in the companies they manage. “A CEO often attracts people-pleasers. That’s why it’s important to surround yourself with those who think differently”, he says.
People suck up to leaders because they have power.
“It’s easier with everyone playing along. Leaders surrounding themselves with weak people pleasers is human”, says Pekka Mattila. But it’s not wise.
In times of uncertainty, people have a need for strong, trailblazing leaders.”
Hambrick finds an intriguing explanation for the demand for self-confident leaders also from the financial market. It’s down to a basic investment principle – diversifying risks.
“Shareholders nudge and encourage the CEO to make bigger and bigger moves. Investment portfolios are so diversified these days that investors needn’t worry too much about one company failing”, says Hambrick.
Investment risks have been diversified so effectively that it allows even outrageous experiments as far as some companies in a portfolio are concerned. If the experiments work out, you get money, and if not, the losses will even out in the portfolio. “This takes some ego.”
Jyrki Wallenius sees hubris as a phenomenon linked to economic upswings. Risk analysis gets put aside when it’s booming and there’s trust in the market. “Before the 2008 financial crisis, my colleague worked for Merrill Lynch and Morgan Stanley, clearly recognizing hubris in the companies. The financial instruments were imaginary, and they forgot to buckle up for the ride and listen. They were invincible.”
Even an entire industry can swell up into hubris, the financial sector is a classic example. At the turn of the millennium, it was the IT industry that was in hubris. History provides plenty of cases. Major risk-taking can become the norm in a sector, as it is copied by others.
Hubris can also affect a team or function, such as an ambitious product development project. “Being too careful can also be a problem. It’s connected to a downswing, after getting hit”, says Wallenius. Being too careful can lead to a company not making efficient use of resources, and the company’s value not growing as much as it otherwise could.
Being too careful can also be a problem. It’s connected to a downswing, after getting hit.”
Wallenius sees the hubris leader more as a US phenomenon, as Europe and Scandinavia manifest a more collegial leadership style. In American companies, the CEO and chairman of the board are usually one and the same person, while in Europe the functions are more often divided among two.
“Combining the functions can be good, if the company has a clear direction and selected strategy. A two-leader model works when you need a challenge and new perspectives”, says Timo Vuori.
When asked whether hubris has changed, too, Hambrick pauses for a moment. Is the type of behavior we think of as hubris different than before?
“It’s a good question. We may have become immune to obnoxious, harsh behavior. What was seen as colorful behavior 30-40 years ago can be thought of as normal today. Sociopsychological studies show that narcissism has increased consistently over recent decades. We live in a self-oriented society, where men are more self-involved than women.”
How to prevent hubris?
The best way is to keep it under tabs right from the start. The further along the hubris of a leader, team or industry goes, the harder it is to control. Timo Vuori thinks that hubris or strong narcissistic tendencies may go unnoticed in a job interview. “To avoid hubris, take a look at the applicants’ CV: how risky are the decisions they’ve made, what have they done? How many projects have they carried through? It’s always possible to put on an act in an interview. You can observe how much applicants focus on themselves and how much on their team.”
To avoid hubris, take a look at the applicants’ CV: how risky are the decisions they’ve made?”
Jyrki Wallenius thinks it’s important to interview the applicant’s former colleagues. ”In an interview, an applicant can list completely reasonable pointers for hours on end.”
Usually, smart people are interested in developing themselves. But in hubris, personal weaknesses are a blind spot. A smart leader grasps the risk of hubris in advance. There s a rule of thumb for any delusion: if you are aware of delusions, you can prepare for them. That s what a good leader should do , says Wallenius.
One example of a delusion mentioned by Wallenius is over-confidence in one’s knowledge. Classic calibration tests have been applied to studying the phenomenon, especially for probability estimations. People think they know more than they do. When you are aware of your leanings towards delusions, you can be prepared.
In the classic calibration test, leaders usually estimate the range for say a city’s population too small. When the range is too small from the outset, they get fewer questions right.
In a survey by Canadian executive search firm Heidrick & Struggle’s, a fifth of 150 executives claimed to never doubt themselves. On the other hand, 71 percent claimed they had doubts, but made use of them in decision-making to analyze risks. Self-criticism and humility are good ways to prevent hubris. Respondents to the survey felt the surest sign of a team being in hubris was when it neglected or kept its distance from customers. To shake up a team with leanings towards hubris, you can leave a chair empty in a meeting to denote the customer. Having less and less contact with customers is a bad sign.
Self-criticism and humility are good ways to prevent hubris.”
Jyrki Wallenius recommends seeking out a devil’s advocate – someone who will dig out the weak spots and inconsistencies of an idea. All in all, it is important to be able to talk honestly to a leader. A raging, fearmongering hubris leader can lead to employees covering up their shortcomings. “Ideas and visions need to be tested diversely. For example, bridge engineers carry out usability tests. Why wouldn’t leaders apply the same to decisions?”, asks Wallenius.
Another piece of advice from Wallenius is for leaders not to express their views too forcefully and too early. “People have a habit of conforming. The corporate culture should foster everyone’s ability and desire to question, ask, and listen.”
A company’s board has a key role in steering a leader’s work. According to Timo Vuori, the board needs to keep in tune with what’s going on. After all, the board approves at least big-scale acquisitions. “It’s not a good sign if the company’s board works mainly as a rubber stamp, and the board isn’t able to challenge the managing director to a factual discussion. If the CEO keeps turning up to meetings with a proposal for direct approval, you can ask why the CEO isn’t being challenged by the board.”
Vuori mentions an example of office politics that can be an everyday hindrance: CEOs can be board members in other companies and make the life of a board member in the company they lead difficult, if their views are being questioned.
Christian Stadler from Warwick University talks about intelligent conservatism, which he claims to curb hubris from erupting in companies. Stadler has examined European companies that have succeeded exceptionally for a hundred years.
One of Stadler’s examples is British Glaxo, which started out as a general merchandising business in 1861. Patented milk powder steered the way towards a pharmaceutical company. Glaxo has been able to buy out its rivals along the way. Today, GlaxoSmithKline is a global pharmaceutical giant. According to the study, the success of German insurance company Allianz is based on making efficient use of its customer base, while French cement manufacturer Lafarge used the profits from building the Suez Canal to increase internationalization. Corporations with enduring success on Stadler’s list also include large European companies Shell, Siemens, and Nokia.
The corporate culture should foster everyone’s ability and desire to question, ask, and listen.”
The study indicated that instead of being charismatic power figures, the managing directors of the most successful companies were careful, meticulous, and even thought of as boring. The corporations were often very conservative when it came to change. Especially major strategic changes were prepared painstakingly over a long period of time. As opposed to typical intuitive hubris strategies, the companies focused on making use of the resources they already had instead of aiming to conquer new areas. They focused on their strengths.
The companies were also eager to reflect on past mistakes – something that a hubris leader can hardly be pictured doing. Hubris is linked to a low toleration of criticism. Based on his research, Stadler advocates internal advancement and promotions instead of external recruitment.
”A CEO who has started from the bottom knows plenty of people in the company. Seeking a rescuer from the outside can feed hubris”, says Stadler. With a functional network, the CEO won’t become isolated and down to a single point of information. Stadler also feels that coming in from another sector can be an unnecessary risk. This goes against the current trend of thinking that professional executives get to shine no matter which industry they come from. “An insider is better aware of what’s possible. You can always use consultants to gain additional perspectives.”
An insider is better aware of what’s possible. You can always use consultants to gain additional perspectives.”
Also, Stadler’s notion of tempo challenges current trends. ”I don’t believe in speed. Change takes time. Think of solar energy for instance, which has been tested since the 1970s, for nearly fifty years. It’s mainly communication that is now faster in business, not necessarily anything else.” He points out that each generation assumes it is going through the most crucial shift of all times. “The surveyed companies managed to successfully navigate the 1930s great depression, two world wars, two oil crises, the invention of the phone, television, and computer…”
Stadler’s list sounds surprisingly untrendy. It’s hard to imagine fast-moving celebrity leaders, whether visionary business savvies or arrogant braggers, seeking employment in companies of intelligent conservatism. Not that the companies would like them on the payroll, either.
Perhaps what makes an ideal leader is changing in other ways, too, as lately listening has been emphasized as an important leadership quality. Leaders are also advised to care and show empathy. Even servant leadership has gained favor, where the leader serves subordinates in order to improve their operating environment. The dawning change is at least partly due to hierarchy and authority dissipating from society, and the same applying to companies. You can’t make millennials bloom by telling them to. A milder leadership style also goes hand in hand with growth slowing down and carefulness stepping in.