RESEARCH
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Narcissism and CEO Decision-making

A research paper focussing on CEO Narcissism that has just won the Academy of Management Glueck Best Paper Award for 2011 addresses and to an extent refutes the approach that higher levels of narcissism are inherently harmful.



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‘CEO Narcissism and Incumbent Response to Technological Discontinuities’ was authored by Professor Albrecht Engers of IMD along with Christian Gerstner of McKinsey and the University of Erlangen-Nuremberg; Andreas Koenig of IMD; and Don Hambrick of Pennsylvania State University.

The authors conclude their research by suggesting that in a world where we are frequently asking for visionary, courageous and transformational leaders, a certain element of narcissism can be beneficial as it brings with it self-confidence and the need to be seen as bold, active and successful.

Their research focused on US pharma companies in the period 1980-2000, when biotech was in the ‘excitement phase’ of being a new disruptive technology (following the experimental phase and preceding the accepted phase). Biotech, as with other discontinuous technologies, discards the old methodologies and all the financial and experiential investments they had accumulated, for something new and as yet unproven commercially; but the rewards for getting in early were large.

Correlating the personality types of the CEOs based upon four factors (their photo size and position in the annual report; their relative frequency in press releases; and their cash and non-cash compensation relative to the next best paid executive) to the organisations’ propensity to invest, acquire or collaborate on biotech projects – the authors saw a strong link between the speed and intensity of such investment and the more narcissistic the CEO.

Referring to Upper Echelon Theory, (originated in a 1984 paper by Don Hambrick, one of this new research’s co-authors), which proposes that the background and prior experiences of senior executives informs their decision-making and so the shape of their organisations, the authors show that the more narcissistic CEOs clearly led to greater and more quicker investment in this discontinuous technology.  Suggesting that if bold, transformatory decisions are required for an organisation a leader with narcissistic traits may be more beneficial than a more cautious less narcissistic leader.

In our conception, narcissism is a spur to risk-taking and innovation; when others are timid, the narcissist acts on his or her supreme confidence and  craving for applause. In this vein, other writers also have discussed the potential benefits of narcissistic leaders, especially under dynamic conditions. Maccoby  said, “narcissists are wired for periods of rapid and disruptive change.” He also described narcissists as having a “change the world” personality.

 

Narcissists may be interpersonally annoying, and their self-centeredness may engender outright selfish behaviour, but there is nothing in the narcissistic syndrome that is inherently insidious. Narcissists are not, per se, destructive or evil. They do have, however, the tendency to engage in grandiose strategic behaviours and are willing to take risks when others might not want to do so. To the extent that bold, quantum, and unconventional actions are needed to save an organization, a narcissistic leader may be the best bet.

The authors also stress however that the biotechnology revolution was largely a commercially successful one – but that statistically most new disruptive technology ideas fail. So the bold, higher-risk decision in this research was rewarded but that is not always going to be the case. 


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