The High Cost of Executive Bullying

For generations bullies have terrorized their victims at school, in the locker room and on the playground. More recently, incidents of cyber-bullying and violence against gays have received national attention. The victims of such bullying often feel afraid, out of control and even stupid. They respond by drawing as little attention to themselves as possible and hoping it doesn’t happen again.

Not surprisingly, this same reaction occurs when the CEO or other senior leaders subject people to bullying at work. While the corporate bully may not look or act like the playground thug, the victim’s response in either case is to hunker down and get out of the way. The schoolyard bully uses physical violence; the executive bully uses fear or the threat of humiliation to silence critics or contrarian voices.

Executive bullies don’t all have the same personality. The most pernicious type of corporate bully is the one who comes across as polished and sophisticated. Everything about him sends the message that he is the smartest guy in the room — the one who will make the decisions and get the credit. Although he may ask for others’ opinions and give lip service to their ideas, it’s clear to everyone that it’s “my way or the highway.”

In a corporate setting, that adds up to lost opportunity. Employees’ voices go unheard. Product defects are covered up; unethical practices continue unchecked; untenable financial risks are ignored; brilliant ideas never see the light of day. People are intimidated into keeping quiet.

Bullies may “shoot the messenger,” punishing those who deliver unwanted news. More common, however, is for executive bullies to flaunt their power by summarily dismissing ideas or warnings they don’t want to hear.

The effect is especially harmful when senior team members bully their own colleagues. Ideas that could help resolve strategic and operational issues are not even broached, leading to poor decisions and inadequate solutions. The senior team’s ineffectiveness reverberates throughout the company.

People in positions of authority are invested with legitimate power, and using it constructively to accomplish business goals is justifiable and expected. But in today’s world, in which businesses must make complex decisions in the face of incomplete information and a rapidly changing landscape, no single person has all the answers. Leaders who are dismissive, instill fear or continually demonstrate “who’s boss” discourage employees from expressing their ideas. What would have happened if the young Larry Page or Mark Zuckerberg had needed to convince a powerful executive bully that their game-changing ideas were worth pursuing?

Senior leaders who pay attention to what colleagues are saying are in a better position to meet strategic objectives and deliver sustainable results.

JPMorgan Chase CEO Jamie Dimon, who reportedly can be brash and domineering, nevertheless heeded the warnings of senior executives in 2006. They cautioned him against investing too heavily in risky collateralized debt obligations built on mortgage-backed securities. That was at a time when other financial institutions were making a killing on CDOs.

Dimon backed up the executives despite pressure from analysts, investors and his board, according to Gillian Tett in her book Fool’s Gold. As a result, JPMorgan Chase came through the financial system meltdown in far better shape than other large U.S. banks.

Unfortunately, there are many more examples of leaders who ignored bad news or contrary opinions in the run-up to the financial crisis and suffered the consequences. Think of Stan O’Neal at Merrill Lynch, who was known for quashing debate and firing people whose views ran counter to his own (Merrill Lynch was taken over by Bank of America); Jimmy Cayne, whose detachment and dictatorial behavior contributed to the downfall of Bear Stearns; Richard Syron, who repeatedly rejected internal warnings that Freddie Mac was buying bad loans and denied responsibility when the housing market collapsed; or Joe Cassano, the head of AIG Financial Products, who presided over the business in credit default swaps that drove the firm into a colossal government bailout and damaged its reputation.

A similar situation unfolded recently at MF Global Holdings, where chairman and CEO Jon Corzine directed the firm to make substantial investments in European sovereign debt. Chief risk officer Michael Roseman warned repeatedly about such risky exposure, but Corzine and the board that hired him ignored the warnings. According to the Wall Street Journal, Corzine even hinted that he might leave the company if the board didn’t trust his judgment. Instead, MF Global informed Roseman in January 2011 that he would be replaced. The company bet even more heavily on European debt — and filed for bankruptcy in October after suffering devastating losses.

Why are so many leaders unwilling (or unable) to heed messengers who have the best interest of the company at heart? It’s likely that they tend to view relying on others, expressing doubt or admitting inadequacies as indications of weakness — and weakness is not an option.

These highly competitive people have a strong desire to win, and winning even short-term victories intensifies that desire. All too often, however, it also intensifies self-reliance and suspicion of alternative perspectives. After all, “strong-mindedness” is what got them there in the first place. But when strong-mindedness hardens into close-mindedness, the result is isolation. Most of the people who have risen to the top have been rewarded for knowing, not asking.

Author Jonah Lehrer has reached a similar conclusion. In a Wall Street Journal article about “the power paradox” Lehrer wrote that when leaders rise to power, they change from being “polite, honest and outgoing, [to] become impulsive, reckless and rude.” He added, “Instead of analyzing the strength of the argument, those with authority focus on whether or not the argument confirms what they already believe. If it doesn’t, then the facts are conveniently ignored.”

Under pressure from the investment community and the board to achieve remarkable results in 18 months — or even a single quarter — CEOs become fearful. They instinctively take control, shutting out input from others. But that is the opposite of what they need to do.

At NetApp, perennially one of Fortune’s “Best Companies to Work For,” senior leaders demand interaction and debate. The rule is “If you have something to say, say it. The only unacceptable thing is to leave a meeting and then talk about what you heard in the meeting,” according to Vice Chairman Tom Mendoza. “If people think there’s a top six to ten people who will make all the decisions, that gives them the right to shut down. I believe we have to give them enough information so they will go home and think about it.”
As a result, ideas percolate up at NetApp. “Basically the concept is that we work for them. We invert the pyramid,” added Chairman and CEO Dan Warmenhoven.

When someone approaches Marty Nesbitt, president and CEO of The Parking Spot, with an idea, he says, “We talk about it right there. Maybe I don’t understand it but if that person thinks the idea could make us more money or solve a problem, then we ought to explore it. As long as people are enthusiastic and committed to an idea, I allow them to keep working on it until they convince me.”

Often the dialogue itself results in a better concept. Nesbitt recalled a situation in which an employee proposed a new business idea. Nesbitt wasn’t convinced that it was a good idea, but the two of them kept talking about it. “I changed his perspective and he changed mine. Now we’ve morphed it into an idea that we both came up with. And the dialogue wouldn’t have ever started unless he brought the idea to me.”

Of course, leaders must sometimes take charge and make the tough calls, and in some cases there is no time to collaborate or solicit alternative views. But such situations are not the norm. “My way or the highway” is not an effective way to lead on a regular basis. As former IBM chief Lou Gerstner has said, workers should fear the competition, not their bosses. In an uncertain economic environment, leaders must solicit diverse viewpoints, remain open to new approaches and be willing to accept harsh realities.

Nesbitt is convinced that leadership means trusting smart people to make good decisions even when a suggested approach is unusual. When The Parking Spot, which owns and operates parking facilities near major airports, started in 1998 it was built around a relatively conservative brand. “A couple of years later we hired a marketing person to take control of our brand and the first thing he said was that our identity was all wrong,” Nesbitt recalled.

The new brand manager proposed a new identity based on black-on-yellow polka dots — “spots.” “He thought it was a good idea and I didn’t, but I knew if I was to be the leader I want to be, I had to let this go. It was the best leadership gesture to say we must do it,” Nesbitt said. He gave the go-ahead for a total rebranding campaign, and attributes much of the company’s subsequent growth and success to the new identity.

“It was the single most important business decision we ever made and I made it, not from a financial perspective, but because I knew it was the right thing to do as a leader.”

Yet over and over, companies fail to listen to new approaches or warnings of dangers ahead. They avoid the “unspeakables” — the formidable challenges that everyone acknowledges but no one is willing to bring up for fear of incurring the leader’s ire. Thus employees not only deprive the company of their own best thinking, but they miss the opportunity to collaborate and come up with better solutions. I believe that the biggest single failing of many companies is that they leave so much money on the table — the financial gains they could have realized had they heeded warnings and embraced new approaches.

Recent research conducted by consulting firm Ferrazzi Greenlight supports that conclusion. Writing in the Harvard Business Review, CEO Keith Ferrazzi reported that, of six top banks, those whose leadership teams scored the lowest on candor saw the poorest financial returns during the recent global economic crisis, while groups that communicated candidly about risky practices and potential problems managed to maintain shareholder value. Ferrazzi concluded, “True collaboration is impossible when people don’t trust one another to speak with candor. Solving problems requires that team members be unafraid to ask questions or propose wrong answers.”

When Sonny Garg became president of Exelon Power in August 2010, the company was facing serious challenges, including the closing of several plants, external industry challenges and regulatory changes. Exelon Power appeared to be shrinking and rumors of its demise were rampant.

In early 2011, Garg brought in the Center for High Performance to train leaders and managers to create an open, honest, non-punitive environment where new ideas could take root. Under Garg’s leadership, the company created the “Answering the Call” campaign to encourage communication, formalize the grapevine and bring hallway conversations into the meeting room. “We took people who are well trusted by their peers and made them conduits for information,” said Garg. “We’ve built a stronger sense of trust between leadership/management and employees. People want to feel that they have access to information. We treat them like adults,” he added.

As a result, employee engagement increased 3 percentage points in the last year alone and 4 percentage points in two years, according to a 2011 employee survey. “Commitment to the work and the company” increased by 8 percentage points. The company is now in a much better position to capitalize on opportunities as they arise.

All senior leaders want to succeed and want their companies to succeed. However, if executive bullies are successful, it is despite their bullying not because of it. Executive bullying creates an unhealthy work environment — rife with micro-management, information hoarding and self-interest. This behavior may seem like it’s working in the short term, but what may look like positive results are often short-lived. Sometimes, by the time the company sees the damage, the bully has moved on, leaving the blame to his successor.

When executive bullying flourishes, disrespectful treatment of others can become systemic. I have observed over the 30 years I’ve worked with companies that what goes on in the C-suite sends ripples throughout the organization. Behaviors that originate with the CEO and his direct reports filter down, where they are repeated and amplified. Just as business success can be traced back to a leader’s conduct, so too can business failure. It’s up to the leader to see the bullying cycle for what it is, and avoid it.

Bully Prevention

Below are six steps leaders can take to avoid becoming an executive bully once they move into the corner office.

1. Set a high ethical bar: Effective leaders understand that behaving morally and not breaking the law are sometimes two different things. Whether or not the behavior of employees at Rupert Murdoch’s News Corp. is ultimately found to be illegal, hacking the phones of celebrities, politicians, relatives of dead soldiers and even a murdered English schoolgirl is unethical, and the company has suffered mightily as a result.
2. Create a charter: The top leaders at NetApp put together a code of conduct based on what NetApp’s Dan Warmenhoven calls “the five Cs”: candor, collaboration, commitment, communication and community. Similarly, the leadership team at Unite Group PLC, an FTSE 200 company, created a written charter that lays out the values, behaviors and expectations for individual members and the team as a whole. According to Unite CEO Mark Allan, “When you go through that exercise, it gives a shared reference point to hold colleagues to account. We believe that the way the leadership team behaves is the way the rest of the organization will behave.”
3. Set and enforce a “no bullies rule”: How many senior teams have a member who shuts down everyone else’s ideas, is driven to win every argument, never gives credit to the troops and excels at touting his own accomplishments? If your company puts up with this, you are enabling executive bullies. Give team members permission to call out this behavior — even when you are exhibiting it yourself. Barclays CEO Bob Diamond instituted his own version of the “no bullies rule” at the British bank (he calls it a “no jerks rule”), and has fired 30 people who violated it. “If someone can’t behave with their colleagues and can’t be part of the culture, it doesn’t matter how good they are at what they do, they have to be asked to leave,” Diamond told The Guardian.
4. Pass the ball: Business is a team sport. No single leader can be expert at everything. Most, in fact, have glaring blind spots. The best executives recognize that and call on others with different strengths to help. Just as executives have content skills, they also have process skills. For example, I once worked with a research and development company whose CEO was a visionary with a talent for seeing opportunities. The head of operations was the opposite — he was always able to identify risks. The business development person brought context and history to the discussion; the marketing person was attuned to how the workforce would react. Together they made an effective team.
5. Welcome contrarian voices: How many breakthroughs might have been made or disasters averted if domineering executives had not told other team members that their idea was unachievable or their information was wrong? To encourage the free flow of ideas, John W. Rogers, Jr., CEO of Ariel Investments, found a way to ensure that the contrarian voice is heard. “We have formalized the role of the devil’s advocate to force a structured dissenting view in our investment meetings…. By designating another senior member of our team to argue against an idea with the same rigor with which it was researched by the industry specialist, we ensure a balanced argument is not only presented but also heard, ” Rogers told the Wall Street Journal.
6. Take a look in the mirror: Try to see yourself as others see you, and then ask, “Is that the way I want to be perceived?” It can be helpful to make video recordings of yourself during meetings and watch them with an outside observer who has no stake in the game — perhaps an executive coach. Are you willing to accept harsh realities and confront the problems direct reports bring to your attention? Did you respect the ideas of others? Did you encourage thoughtful debate, or did you squelch it?

Most leaders want to do the right thing for their companies, their people and their communities. They don’t set out to be bullies — indeed, it’s doubtful that even the worst offenders think of themselves that way — but they may become bullies nevertheless. Executives could achieve better results by collaborating to address complex issues instead of unilaterally dictating the way forward. The bottom line: executive bullying is systematic disrespectful treatment of others. And it’s not good for business.

Warning Signs: How Can You Tell if You Are a Corporate Bully?

• You tend to label people who disagree with you as “naysayers,” “risk-averse,” “incompetent,” etc.
• You fall in love with an idea, position or deal.
• No one ever finds fault with your point of view.
• There is little disagreement or debate within your leadership team.
• When your team does debate an issue, there are clear “winners” and “losers.”
• You deliver results but people don’t enjoy working for you.
• You always believe you are the “smartest guy in the room.”
• Your direct reports rarely tell you bad news.
• You are taken by surprise when things go wrong.
• You believe you are better at almost everything than anyone else on your team.
• You blame others when things go wrong.
• You rarely admit mistakes or apologize.
• You are an expert at “gotcha” — catching others in an error.