STOCK MARKET WATCH -- Tuesday, 18 June 2013

[Demeter]

12. Deluded bosses: Who’s behind me? The powerful overestimate the support of underlings

UNLESS YOU HAVE PREDATOR DRONE CAPABILITY...

http://www.economist.com/news/business/21579031-powerful-overestimate-support-underlings-whos-behind-me

HISTORY is littered with powerful people undone by hubris. Julius Caesar should have ignored the cheers of the Roman crowd and paid heed to the soothsayer. The late Steve Jobs overplayed his hand at Apple as a young man and was kicked out of the company he founded. And then there was Jimmy Cayne.

When Mr Cayne walked out of Bear Stearns for the last time, having been eased out as boss of the ailing bank, he claimed there wasn’t a dry eye in the house. Through the tears, he wistfully recalls, heart-broken bankers sent him on his way with a standing ovation. This is not how his staff remember it. So disliked was he that according to “House of Cards”, a book by William Cohan, underlings would ask in meetings: “Is Jimmy staying on? Because we’re not coming back for another year of this shit.”

After reading Mr Cayne’s tale Sebastien Brion, a professor at IESE, a business school, decided to test whether the powerful overestimate the strength of their bonds with subordinates. The results, published in Organizational Behavior and Human Decision Processes, will come as a shock to business big cheeses, but to no one else. In one experiment, he randomly assigned people in work groups with positions of high or low power, or to a control group. Questioned afterwards, those primed with high power were convinced the others were on their side; a view not shared by those being bossed. In another he found that lowly participants would form alliances against the powerful, even when it was not in their financial interest to do so. The mighty were blissfully unaware of the forces working against them. So not only do bosses set too much store by their strengths, as our Schumpeter column notes, they also habitually overestimate their ability to win respect and support from their underlings. Somehow, on reaching the corner office, they lose the knack of reading subtle cues in others’ behaviour: in a further experiment Mr Brion found that when a boss tells a joke to a subordinate, he loses his innate ability to distinguish between a real and fake smile.

At the very least, bosses might improve their chances of staying on top by being aware of this bias. Some might feel that it just goes to show how Andy Grove, a founder of Intel, was right to say that “only the paranoid survive”. However, besides watching his back Mr Grove also instituted a scheme in which employees stood nose-to-nose with bosses and shouted their honest advice into their faces. Maybe that is going too far, but some sort of mechanism for letting underlings speak truth unto power may be sensible, even if Mr Cayne might not have relished it.