HR executives need to be aware of the potential effects narcissistic CEOs can have on a business and be proactive in dealing with likely issues that may arise as a result, according to the Macquarie Graduate School of Management (MGSM).
CEOs with narcissistic tendencies can create “quite a lot of work” during their tenure for HR executives, particularly when it comes to balancing issues such as positive impact on share price versus potential negative impacts on organisational culture.
“HR executives have to deal with the fallout,” said MGSM dean Alex Frino. “But does that mean you should avoid hiring such an individual? Of course not. It always comes down to fit.”
Frino was commenting on an MGSM study which revealed that companies led by less narcissistic CEOs have significantly outperformed those led by their more narcissistic counterparts.
In fact, the 10 least narcissistic CEOs in the top ASX 100 companies more than doubled the performance of companies led by the most narcissistic CEOs.
Different kinds of companies and trading conditions require different kinds of leadership, according to Frino, who said it was important to assess the personality type of CEO candidates and potential fit against a number of factors.
For HR, he recommended assessing candidates’ levels of self-awareness and whether they are aware of their own weaknesses through interviews as well as assessments which measure the likes of intelligence and emotional quotients.
“Over the last 18 months, during a period of economic uncertainty and when conditions are tough, it is the less narcissistic leader who has performed best”
“So if you have an individual who has a pretty strong personality type who you think is probably self-aware, but doesn’t want to listen to advice, then you’ve got to have strategies for being able to deal with that,” he said.
When investing in leaders, Frino said a long term view was important as CEOs would most likely experience a broad spectrum of tough and buoyant trading conditions.
“I think the Board really needs to understand what they’re up for when the individual comes in and have strategies in place, an understanding of how they might deal with issues that crop up in relation to their personality, as they move forward,” said Frino.
The MGSM study analysed the returns of companies in the ASX 100 over an 18 month period (September 2011 to March 2013), and found that the least narcissistic CEOs experienced the highest returns while the group of firms in the portfolio with the least narcissistic CEOs also outperformed the market over the same period.
The data was compiled using a ‘natural language technology’ developed by the MGSM research team to analyse a CEO’s use of the first person pronouns (I, me, my, mine, myself). The more often the CEO used the first person pronouns in their answers to analysed questions, the more they were considered to be ‘narcissistic.’
The research also found the most narcissistic CEOs were in the telecommunication services sector, followed by mining (materials) while the consumer goods industry appeared to attract the least narcissistic CEOs.
“Many leaders dominating the workforce today possess narcissistic leadership traits, and in this era of constant change and innovation, it seems natural that charismatic, risk takers would take charge,” said Frino.
“However, this research shows that over the last 18 months, during a period of economic uncertainty and when conditions are tough, it is the less narcissistic leader who has performed best.
“Perhaps, if we had extended it back to before the global financial crisis we would have seen very different results,” he said.
The study ultimately aims to quantify leadership qualities and personality traits as predictors of company performance in the market, as well as informing strategies to better educate future company leaders.
By Chadielle Fayad