Companies are better off relying on old-fashioned expertise and openness to feedback.
General Electric’s former chief executive Jack Welch is often posited as the archetype of the successful “charismatic” business leader. He rose to fame for setting big goals and communicating them with confidence, and his influence on business more generally has been substantial.
In fact, a recent survey conducted across 62 countries identified “charismatic” and “inspirational” as two of the most recurrent attributes of a leader, in fields as diverse as politics, the military, sport and business. But does charismatic leadership have a dark side? While a strong personality may be helpful in certain contexts, it’s vital not to overstate its importance.
IT DOESN’T DRIVE PERFORMANCE
Charisma is often an essential aspect of leadership, but companies should not take this to the extreme. After conducting a study of 100 year-old European corporations, researchers from MIT found that the leaders of higher-performing companies were less likely to be perceived as charismatic than those of lower-performing firms.
The authors of the study Christian Stadler and Davis Dyer argue that charismatic leaders’ exceptional powers of persuasion make it easy for them to overcome resistance and opposition to their chosen course of action, which can in turn prevent them from anticipating important risks. Instead, they found that leaders who rely on a combination of old-fashioned expertise and an openness to new ideas were most conducive to a business’s enduring success.
“If your company is heading in the right direction, charisma will get you there faster. Unfortunately, if you’re heading in the wrong direction, it will also get you there faster,” they say in MIT’s Management Review.
OVERCONFIDENCE HAS A PRICE TAG
Strong personalities can also distract people from the facts, and lead them to make costly decisions. Overconfident traders, for example, typically perform worse than their less confident peers, and confident executives often overvalue their companies or have been too optimistic estimating the value of a deal, says psychology writer Maria Konnikova.
In fact, having more experience and knowledge can sometimes make things worse. “The more you know and the better you are in reality, the more likely you are to overestimate your own ability and underestimate the force of events beyond your control,” Konnikova says in her book Mastermind: How to Think Like Sherlock Holmes.
THERE ARE OTHER WAYS TO LEAD
This doesn’t mean that charismatic leadership is an outdated approach. But it should be combined with other techniques to ensure that it doesn’t go wrong. Leaders with a strong personality are more likely to succeed if they devote time to learn from past performance and from their teams.
Take the example of the Ducati Corse motorcycle racing team. A newcomer to the sport in 2003, the team approached its first racing circuit as a learning exercise, Francesca Gino and Gary Pisano say in Harvard Business Review. While this initial strategy paid off, Ducati then stopped focusing on learning, and performance decreased in the next season.
To avoid the success-breeds-failure trap, Gino and Pisano suggest leaders shouldn’t get too comfortable with their performance and should remain open to criticism. As Nobel laureate Daniel Kahneman has said in the New York Times, “true intuitive expertise is learned from prolonged experience with good feedback on mistakes”.
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