Former Barclays CEO Bob Diamond resigned from his position after the bank was fined £290-million for manipulating the interbank lending rate, known as Libor, which affects millions of mortgages. A report by the British parliamentarians ruled that Diamond failed to act with ‘candour and frankness’ and also gave ‘highly selective’ evidence over revelations that his bank conspired to fix interest rates. Diamonds actions in the UK have had dire consequences for its partner bank ABSA in South Africa as well.
The British MPs condemned Diamond and his cohorts’ behaviour as deceitful. What this flawed leadership has demonstrated is that the failure of companies to survive or thrive can be attributed to the culture, relationships, and decisions created or enabled by dysfunctional leadership. A flawed leader may not be apparent for some time, as he/she may be appropriate for a particular stage in the organisational development at a particular point in time. Diamond, for example, was considered a highly successful CEO prior to the Libor scandal. Certain strengths in a leader may also become exaggerated over time, resulting in them becoming abusive of their success and power. Yet again other leaders may have personality disorders or emotional concerns that interfere with their meeting the demands of their position. According to Hogan, Raskin, and Fazzini in The Dark Side of Charisma, the base rate for flawed leadership is between 60-75% in organisations. The following is a brief list of qualities, characteristics, habits, and styles that appear in the literature related to leadership dysfunction.
Sydney Finkelstein in his book Why Smart Executives Fail, cites the core reasons for failure or flawed leadership are how executives perceive reality for their companies, how people within an organisation face up to their reality, how information and control systems in organisations were mismanaged, and how organisational leaders adopted spectacularly unsuccessful habits. He explains as follows:
Executive Mindset Failure
Executive mindset failures are at the root of most large-scale business disasters. In fact, one of the inescapable conclusions from the research program is that billions of dollars are lost because of a kind of "cognitive failure." Executives will regularly send their corporation off in completely the wrong direction or fail to restructure it the way they should, because they have made a fundamental error in the way they are thinking about the opportunities and problems their business faces. Many of the great corporate mistakes had at their heart a fundamental breakdown of managerial reasoning and strategic thinking, necessitating a careful analysis of how to combat these mindset failures.
Protective Mechanisms and Delusional Attitudes
Companies that get their picture of reality messed up don't automatically end up failing. In every instance there was something else that went wrong. Often there was no one around to challenge the status quo and ask the tough questions. But why do companies fall into this trap? What are the underlying reasons why such delusional attitudes develop in organizations, attitudes that legislate not only how executives behave within their own company, but also how they interact with critical outsiders like customers and suppliers as well?
Over the course of the research project, we were struck by how often organizations developed breakdowns in how information was managed, how people and systems were ineffectively developed and controlled, and how boards of directors proved so unsatisfying as the ultimate arbiter of vigilance in a company. What is remarkable about many of these breakdowns, however, is how often executives believe that if there is a control or system in place, it will do the job for which it was intended. In contrast, we found that every single organizational procedure is subject to break down in the real conditions under which companies operate. These breakdowns turn out to be very costly as they remove what should be one of the critical organizational mechanisms that protects against massive failure. Few companies with executive mindset failures and delusional attitudes can withstand the deterioration of the organizational safety net without failing.
The 7 Habits of Spectacularly Unsuccessful People
When we dissected the corporate mistakes and failures we had observed, a pattern of ineffective leadership practices jumped out. These were not just minor misjudgments, but in many cases monumental miscalculations that could be directly traced to a small set of spectacularly unsuccessful leadership habits. There is a fascinating psychoanalytic dimension to this aspect of business breakdowns, but the general subject is still firmly within the domain of business management. However decentralized some businesses might claim to be in their decision making, the importance of leaders is still such that even the largest corporations can be rapidly brought to the brink of failure by CEOs whose personal qualities generate corporate vulnerabilities, rather than remove them. One of the most remarkable findings from the research was that the same patterns of ineffective leadership held in CEOs across sectors and gender. The habits are: