How to intervene when CEO narcissism kills psychological safety

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Ascend to your Summit

18 min readDec 3, 2019

Two important ingredients for successful organisations: a slightly narcissistic CEO and psychological safety within the organisation. But what happens when a very narcissistic CEO turns in to a Big Bad Wolf and starts treating human beings as objects? Try maintaining psychological safety in the team, which sounds like Little Red Cap giving feedback to the Big Bad Wolf, dressed up as her grandmother, and she about the size of his mouth. It is not working out very well.

So, to which extent can they coexist? What needs to be in place to make sure that the Wolf keeps his charm, but does not eat Little Red Cap? How can Little Red Cap believe that she can provide a reality check to the Wolf without being eaten?

In this essay, I will address the importance of both psychological safety and CEO narcissism and I will discuss possible interventions to prevent the coexistence of these two potential opposites of going over the tipping point from constructive narcissism toward reactive and destructive narcissism.

1 Introduction
2 The importance of psychological safety and learning from failures for organisations
3 The importance of CEO narcissism
4 The impact of destructive CEO narcissism on interpersonal relationships
5 The case of NASA
6 The case of Wells Fargo
7 Coexistence of CEO narcissism and psychological safety through intervention
8 Concluding remarks
References

1 — Introduction

Google researched intensively what a strong team makes and as part of Project Aristotle, the advertising giant’s research data indicated that psychological safety, more than anything else, was critical to making a team work. (New York Times, 2016). Amy Edmondson (A. C. Edmondson, 2004) laid the theoretical foundations for both trust and perceived organizational support as enablers of psychological safety at work.

Where psychological safety is a critical element to making a team work, a narcissistic personality is considered to be important for successful leadership. Maccoby (Maccoby, 2003) lists characteristics of narcissistic leaders that make their leadership effective: they are great visionaries with charisma and they can inspire a great number of followers. Exaggerated beliefs about their own capabilities and achievements, supreme self-confidence and dominance are in a certain context needed to inspire a group of followers. However, when narcissism becomes destructive, narcissists treat human beings as objects and are totally self-centred which forms the most important indicator for defective leadership.

Treating human beings as objects while maintaining psychological safety in the team, sounds like Little Red Cap giving feedback to the Big Bad Wolf, dressed up as her grandmother, and she about the size of his mouth. It is not working out very well.

But according to literature, successful organisations thrive on both a narcissistic leader and psychological safety in the team. So, to which extent can they coexist? What needs to be in place to make sure that the Wolf keeps his charm, but does not eat Little Red Cap? How can Little Red Cap believe that she can provide a reality check to the Wolf without being eaten?

2 — The importance of psychological safety and learning from failures for organisations

Organisations constantly seek new ways to improve their processes and outcomes. Their success depends largely on their capacity to learn from their experiences (Reagans et al., 2005). Learning from failures is very important for leaders and managers to increase their capacity to cope with crisis events, by learning from the experience of previous crises (Carmeli & Hoffer, 2009). Just as well for decreasing subsequent accident and incident rates for decreasing an organization’s risk of failure, for enhancing organizational reliability, and for achieving various organizational outcomes such as service quality, adaptability, innovativeness, and productivity.

According to Carmeli and Hoffer, high-quality relationships are demonstrated by respectful interaction and respectful engagement. These values increase information processing capacity by connecting employees who play distinct yet interdependent roles in the organization. When employees who work together have competing goals, a lack of understanding of each other’s roles and a lack of respect for each other’s roles, they are more likely to blame each other for failures.

On the other hand, when employees who work together have shared goals that surpass their specific roles, are connected by shared knowledge of the overall work process and how their roles interrelate, and are connected by mutual respect that enables them to carry out their roles in an atmosphere of openness, employees are less likely to blame each other for failures. They are more likely to experience the psychological safety needed to embrace failure as an opportunity for learning. High-quality relationships create a positive social context in which people feel safe to perform and act. People act in positive ways toward each other and are enabled to act by shared and communal structures, cultures, and processes.

According to the study of Carmeli & Gittell, the impact of high-quality relationships and psychological safety at work on learning from failures, is significant. Their study shows that psychological safety mediates the link between high-quality relationships and learning from failures in organizations.

Given the importance of psychological safety for learning from failures, it is important to better understand the enablers of psychological safety. Edmondson (A. C. Edmondson, 2004) laid the theoretical foundations for both trust and perceived organizational support as enablers of psychological safety at work. In an organizational culture designed for managing failures, fundamental attribution biases are reduced and people are more willing to discuss their mistakes without being concerned that they will be blamed and that their actions will be held against them and harm their self-image and status (Dyck, Frese, Baer, & Sonnentag, 2005; A. C. Edmondson, 2004).

Five years ago, Google — one of the most public proselytizers of how studying workers can transform productivity — became focused on building the perfect team. Code-named Project Aristotle — a tribute to Aristotle’s quote, “the whole is greater than the sum of its parts”, as the Google researchers believed employees can do more working together than alone — the goal was to answer the question: “What makes a team effective at Google?”. (New York Times, 2016)

Project Aristotle’s researchers began by reviewing a half-century of academic studies looking at how teams worked. Were the best teams made up of people with similar interests? Or did it matter more whether everyone was motivated by the same kinds of rewards? Based on those studies, the researchers scrutinized the composition of groups inside Google: How often did teammates socialize outside the office? Did they have the same hobbies? Were their educational backgrounds similar? Was it better for all teammates to be outgoing or for all of them to be shy? They drew diagrams showing which teams had overlapping memberships and which groups had exceeded their departments’ goals. They studied how long teams stuck together and if gender balance seemed to have an impact on a team’s success. No matter how researchers arranged the data, though, it was almost impossible to find patterns — or any evidence that the composition of a team made any difference.

For Project Aristotle, research on psychological safety pointed to particular norms that are vital to success. There were other behaviours that seemed important as well — such as making sure teams had clear goals and creating a culture of dependability. But Google’s data indicated that psychological safety, more than anything else, was critical to making a team work.

3 — The importance of CEO narcissism

An important personal characteristic in terms of leadership is narcissism (Rijsenbilt, 2011). Leaders with a narcissistic personality have the capabilities to exercise power, to manipulate others and the drive to attain power and prestige (Lubit, 2002). Leaders are selected with their existing narcissistic personality traits, because their upside potential is enormous. There are several skills related to the rise and prospering of narcissistic leaders in business organizations. Among these skills fall their drive and enthusiasm as well as their ability to charm and to manipulate others. Narcissistic CEOs have an intense continuous need for affirmation and display highly visible (Hambrick, 2007), even bold actions (Lubit, 2002; Vries et al., 1994).

In the American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition (DSM-5), a narcissistic personality disorder is defined as comprising a pervasive pattern of grandiosity (in fantasy or behaviour), a constant need for admiration, and a lack of empathy. Narcissistic individuals are preoccupied with fantasies of unlimited success, they believe they are special and unique, have a sense of entitlement, are interpersonally exploitive, lack empathy and are arrogant and haughty. Narcissists hold unrealistic exaggerated beliefs about themselves and show a greater tendency towards self-enhancement bias (John et al., 1994).

However, research confirms (Rijsenbilt, 2011) the psychological perspective of productive narcissism and its inherent upside potential. CEO narcissism is a requisite for effective leadership and can be value-adding to the shareholders’ wealth, but high levels of narcissism become destructive. A negative relationship exists between CEO narcissism and countervailing power of the board and the fraud propensity of high narcissistic CEOs; the lower financial performance, the reduced countervailing power and the higher fraud propensity for high narcissistic CEOs elucidate the severe principal-agent problems for high narcissistic CEOs. Narcissism is an essential element for effective leadership, but all parties should be aware of the potential destructive behaviour of high levels of CEO narcissism.

4 — The impact of destructive CEO narcissism on interpersonal relationships

Maccoby (Maccoby, 2003) draws a distinction between positive (productive) and negative (destructive) narcissism and argues that strategic intelligence (foresight, systems thinking, visioning, motivating, and partnering) makes the difference between productive narcissism and its pathological destructive counterpart. Kets de Vries (Vries et al., 1994) distinguishes constructive narcissism from reactive narcissism. Reactive narcissists treat human beings as objects and are totally self-centred which forms the most important indicator for defective leadership. Leaders with a dark side personality show more dysfunctional performance with consequent adverse impact on followers and the organisation (Benson & Campbell, 2007).

The conceptual distinction between bright and dark side personality characteristics originated with Hogan and his colleagues. Hogan, Curphy, and Hogan (Hogan, Curphy, & Hogan, 1994) refer to the traditional Five-Factor Model traits as ‘bright side’ traits. While this model may not be the most comprehensive representation of personality it has been the model of choice for the majority of personality related research.

The dimensions typically included are: extraversion, emotional stability (neuroticism), openness to experience (intellectance), agreeableness, and conscientiousness. These are the behavioural traits leaders seem to exhibit when they are performing at their best. In contrast, derailing/dark side traits can be conceptualized as dysfunctional tendencies that tend to show themselves in times of increased stress or crises. One instrument designed to assess such dimensions is the Hogan Development Survey (HDS, Hogan, Hogan, & Systems, 1997). For example, the HDS attempts to identify people who are prone to emotional outbursts, yelling, and losing control or those who become so overly careful and focused on the details that they are unwilling to make a decision. Such behavioural tendencies damage a leader’s ability to build and maintain high performing teams by undermining trust and interpersonal relationships, as well as follower commitment, and are common causes of ultimate failure, derailment, or general ineffectiveness. The focus on erosion of trust and support draws clear links to long-term problems with interpersonal relationships.

Negative narcissism often promotes a win at all costs mentality which can end in ethics scandals like those that have occurred in some of the world’s largest companies (i.e. Enron, WorldCom, Boeing). The narcissistic culture promoted by narcissistic leadership of some of these companies is often touted as a key factor leading to the company’s (or CEO’s) unethical behaviour and downfall. With the Enron, WorldCom, and Tyco fiascos, the reputations of executives in many types of organizations have been tarnished (Twenge & Campbell, 2008).

5 — The Case of NASA

A number of high profile and very unfortunate cases where leadership failed to build trust and failed to maintain high quality relationships, were the explosions of three space shuttles. According to former NASA Director of Mission Operations, Paul Sean Hill (Forbes, 2017), there were fatal errors in leadership and management that contributed to the three catastrophic spaceflight disasters: Apollo 1 (January 27, 1967), the Space Shuttle Challenger (January 28, 1986), and Space Shuttle Columbia (February 1, 2003).

“Each of NASA’s catastrophic human spaceflight accidents did have a physical engineering cause. In each case the underlying cause for the engineering mistake was a pervasive tendency in the community to ignore or trivialize indicators of problems while racing towards an important objective. This tendency was brought on by senior leaders who were highly respected and very accomplished in both the detailed engineering required to fly in space, as well as in senior management. Their intentions were good, and, like the workforce, they considered their first priority, to be to protect the astronauts. And yet, the environment they created through their management practices led the community to gradually ignore warning signs and accept risks with less and less rigor, and seventeen astronauts died as a result of leadership failings not faulty engineering.”

A New York Times (New York Times, 2016) documentary shows that the engineers lacked the psychological safety to convince their leadership not to launch the shuttles, as soon as they discovered engineering failures. For the leadership team, their prestige seems to be more important than the safety of the launch.

Watch the 20 min documentary of the New York Times
https://www.nytimes.com/video/us/100000002913002/major-malfunction-revisiting-challenger.html

6 — The case of Wells Fargo

Rijsenbilt and Commandeur (2013) have found that there is a positive link between CEO narcissism and the likelihood of committing fraud, meaning that narcissism is a trait that influences the chance of committing fraud. A case where leadership under CEO John Stumpf pushed for an unethical approach to do business and did not tolerate employees questioning the approach, is the Wells Fargo case. In 2016 Wells Fargo was embroiled in one of the biggest banking scandals in history. Wells Fargo was beating the odds in a bad economy.

During the financial crisis in 2008, the bank acquired Wachovia to become the third-largest bank by assets in the United States. A few years later, its growing revenue and soaring stock brought the company’s value to nearly $300 billion. But behind this success was a company culture that drove employees to open fraudulent accounts in attempt to reach lofty sales goals. Between 2011 and 2015, company employees opened more than 1.5 million bank accounts and applied for over 565,000 credit cards in customers’ names that may not have been authorized. Under pressure of the leadership team to hit sales targets, it was revealed that staff had created millions of fake bank accounts in order to hit their goals, under excessive pressure.

Whistle blower Jessie Guitron began working for Wells Fargo in 2008. Soon after, she realised that she and her colleagues faced a company-mandated quota to sign up new accounts. Guitron complained to the leadership team of Wells Fargo about this fraudulent behaviour, but no actions were taken and her complaints were ignored. Jessie Guitron filed a lawsuit claiming Wells Fargo fired her for speaking out against the fraudulent practices she witnessed. Wells Fargo was convicted and the bank has paid out more than $4 billion in settlements and fines since September 2016, much of it stemming from problems that came to light following the sales scandal.

However, apparently fraudulent practices continue as the Justice Department and the Securities and Exchange Commission are investigating alleged problems in the bank’s wealth-management and foreign-exchange business. Wells Fargo is barred from growing after an unprecedented reprimand from the Federal Reserve in February 2018 (Marketwatch, 2018).

7 — Coexistence of CEO narcissism and psychological safety through intervention

With such an enormous impact of the CEO on the performance and the culture of the organisation, it is important to avoid hiring a highly narcissistic CEO and to see a CEO derailing during his or her employment phase, in order to maintain — or grow — psychological safety, the other critical ingredient to performance. In the hiring phase, it is important to assess the CEO candidates thoroughly on their personality.

Critical attention needs to be given to the balance between the so-called bright side factors as per the Five Factor Model and the dark side traits as per the Hogan Development Survey. Boards, assessment agencies and head hunters need to be very much aware of the extent to which the selected CEO could become destructive for the organisation and could have his or her dark side dominating behaviour.

Observations and assessments should not come to a standstill during the employment phase of the CEO. Organisations should have intervention mechanisms in place, which provides Boards and the CEO’s management teams to prevent the CEO from derailing at best, or at least to be able to act against a derailing CEO, before a tipping point has been reached, and the destructive traits of the CEO have become too dominant, impacting trust and interpersonal relationships.

I would like to suggest two interventions that might keep a potential highly narcissistic CEO from derailing. One intervention is presented to the workforce, a bottom-up intervention. And one intervention is presented to the Board, a top-down intervention. These interventions would keep the CEO in power but make sure that the CEO can be confronted with destructive behaviour periodically, allowing the CEO to reflect and change course to constructive behaviour, guarding psychological safety in the organisation.

A bottom-up intervention mechanism would be to make use of employee surveys specifically directed at how psychological safety in the organisation is perceived, complemented with employee interviews. Amy Edmondson has produced such a survey addressing the psychological safety, team learning climate, team learning behaviours and team learning outcomes (A. Edmondson, 2009). The Team Learning and Psychological Safety Survey is a 24-item measure.

Team psychological safety, defined as the extent to which the team views the social climate as conducive to interpersonal risk, is assessed. Internal team learning behaviours, including the extent to which team members engage in behaviours designed to monitor progress and performance against goals, and behaviours designed to test assumptions and create new possibilities, and external team learning behaviours, defined as the extent to which team members engage in behaviours designed to obtain information and feedback from others in the organization or from customers, are also measured.

The respondent must also provide information on team learning outcomes which are defined as the learning benefits for individual team members as a result of working on this team. The results of the study supported the proposition that team psychological safety affects learning behaviour, which in turn affects team performance. The relationship between team psychological safety and learning behaviour received substantial empirical support. Team members’ own descriptions, taken from different types of teams and settings, illustrated how a climate of safety and supportiveness enabled them to embrace error or to seek feedback from customers and make changes in a product design. Conversely, a lack of psychological safety contributed to an unwillingness to question the team goal for fear of sanction by management.

A top-down intervention mechanism would be to strengthen the countervailing power of the Board of Directors by reducing the size and optimising the composition of the Board (Rijsenbilt, 2011). The Board of Directors has various functions. The Board has to select, evaluate and replace the CEO, approve the financial statements and advice, determine executive compensation and take care of succession planning. According to Antoinette Rijsenbilt the size of the Board should be rather small in numbers, as effective board monitoring is reduced in case of many Board members, because individual Board members are less likely to be held accountable. Board members of large Boards are more likely to be manipulated by top management. Smaller Boards are more cohesive, more productive and more capable in monitoring.

The composition of the Board should exist of independent Board members, with special attention to bringing outside members on board, as they are more independent than inside members. The appointment of directors is voted upon by the shareholders in a general meeting. The available directors to vote upon, are largely selected by either the whole Board or a nominating committee. To avoid the influence of the CEO on the selection process, the CEO should be excluded from the nominating committee. This would require a strong Board to insist on such an intervention.

Additionally, I would suggest a third intervention, which would actively involve the CEO in terms of creating a culture that safeguards psychological safety. This intervention is to collectively — meaning CEO, workforce, and Board — develop and implement a shared charter for organisational norms and values. This charter is similar to common customer charters, which is an agreement how to treat customers’ interests and to safeguard that no harm will be done. A charter that is signed of by both the CEO and the workforce, allows everyone to hold each other responsible and accountable for not respecting the organisational norms and values. This may require a mindset change in most companies, as it changes the usual standing of a CEO, which is above anyone else in the organisation.

8 — Concluding remarks

CEOs have an enormous impact on the organisation and an important characteristic of successful CEOs is that they have a narcissistic personality. Leaders with a narcissistic personality have the capabilities to exercise power, to manipulate others and the drive to attain power and prestige, and have an enormous upside potential. Research demonstrates that constructive narcissism of the CEO has a positive impact on the performance of the organisation. CEO narcissism is a requisite for effective leadership and can be value-adding to the shareholders’ wealth, but high levels of narcissism become destructive.

Destructive or reactive narcissism exposes derailing or dark traits of the CEO personality, which has an adverse impact on trust and interpersonal relationships. Trust and high-quality relationships are essential for psychological safety and learning from failures, which positively impacts the resilience of an organisation as well as of the employees within the organisation. Among other research, Google’s Project Aristotle demonstrated that psychological safety is vital for a successful organisation as it is critical to make teams work.

The consequences of lacking psychological safety, could lead to disasters such as demonstrated in the NASA case and the Wells Fargo case. There are plenty of examples from the aviation industry, utilities industry, and financial services industry where psychological safety was not secured and where leadership showed its dark side.

It is fair to say that coexistence of a CEO with a narcissistic personality and psychological safety in the company is challenging. Interventions seem to be needed. Bottom-up, employees need to be given a voice to share their perception of psychological safety in the organisation. Top-down, a critical assessment of the size and composition of the Board is required in order to provide the Board with countervailing power toward a potential highly narcissistic CEO. A charter for the organisational norms and values, signed of by the CEO, workforce and Board would allow everyone to hold each other responsible and accountable for not respecting the organisational norms and values.

Originally published on STRATZR.com

Björn provides a foundation for growth and performance through STRATZR and Ascend to your Summit, an organisational & human advisory company.
Björn is a Dutch/Swiss national, lived in 7 countries and is fluent in English, German and Dutch. His professional career took him to all corners of the globe, in consulting, operational and executive roles. During 17 years, his employers were mainly blue chip companies, before he decided to start share his experience to make his clients grow and perform.
Björn is currently completing his Master Thesis for the Executive Master Consulting & Coaching for Change (2020) at Oxford University Said Business School & HEC Paris. The topic is about the CEO’s responsibility to establish psychological safety in the management team. He holds two Master degrees in Business Administration from Rotterdam School of Management and in International Management from CEMS.

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