Professional Documents
Culture Documents
The
Curse
of the
THE SECRET to being a suc-
Superstar lists the various charisms, or
CEO
cessful CEO today, it's almost gifts of the Holy Spirit, that
universally assumed, is leader- Christians may possess. Ac-
ship. Such qualities as strategic cording to Paul, those gifted
thinking, industry knowledge, with charisma in this sense in-
and political persuasiveness, clude"good leaders."They also
though desirable, no longer include church members with
seem essential. Particularly extraordinary endowments,
when a company is struggling, such as the power to speak in
directors in the market for a by Rakesh Khurana tongues or work miracles.
new CEO-as well as the in- Of course, the meaning of
vestors, analysts, and business charisma has changed since
journalists who are watching their every move-will not Saint Paul's time, but there is a lingering sense of admira-
be satisfied with an executive who is merely talented and tion-even worship-for the few who are thought to pos-
experienced. Companies now want leaders. sess uncommon inspirational powers. We now think of
But what makes a successful leader? When people de- charisma as a set of personal qualities that inspire awe
scribe the qualities that enable a CEO to lead, the word and submission in others. Jeffrey Garten, dean of the Yale
they use most often is "charisma." Biographers and jour- School of Management, vividly captured the aura of the
nalists have spilled much ink trying to deconstruct the charismatic leader in his book The Mind of the CEO. De-
charisma of superstar CEOs such as Lee lacocca, Jack scribing his first meeting with C. Michael Armstrong, now
Welch, and Steve jobs. Nevertheless, charisma remains as the CEO of AT&T, Garten effused that Armstrong "radi-
difficult to define as art or love. Few who advocate it are ated the confidence, enthusiasm, and energy of a sea-
able to convey what they mean by the term. Fewer still soned politician.. .You had the sense that if you were mak-
are aware that the concept is borrowed from Christianity. ing a movie and said, 'Get me a CEO,' to the casting
In a passage from the New Testament, the apostle Paul director, he'd give you Michael Armstrong."
In researching CEO successions in large U.S. compa- will probably go down in history as the first modern
nies over the last half dozen years, I have found that such example of a charismatic business leader. Soon after
rapt responses play a surprisingly significant role in de- Iacocca's turnaround of Chrysler made him a celeb-
termining who is considered qualified to lead America's rity and even a national hero, Steve Jobs, the New Age
great corporations. And I have concluded that the wide- wunderkind of Apple Computer, gave a more contempo-
spread quasi-religious belief in the powers of charismatic rary spin to Iacocca's brand of inspirational leadership.
leaders is problematic for a number of reasons. First, faith Revered for his success in introducing people to the per-
exaggerates the impact that CEOs have on companies. sonal computer-which he dubbed the Star Wars-like
Second, the idea that CEOs must have charisma leads "force" that could guarantee our "freedom"-Jobs created
companies to overlook many promising candidates and a corporate culture that has become widespread. In this
to consider others who are unsuited for the job. Finally, new organization, employees were supposed to work
charismatic leaders can destabilize organizations in dan- ceaselessly, uncomplainingly, and even for relatively low
gerous ways. Before taking a closer look at each of these pay not just to produce and sell a product but to realize
dangers, let's untangle the paradox of just how charis- the vision of the messianic leader.
matic leadership has come to be the ideal for American What made these chief executives different from their
business in an era we like to celebrate as being rational predecessors, apart from their celebrity status and exag-
and enlightened. gerated self-importance? For a start, the charismatic CEO
was typically-though not invariably-either an entrepre-
neurial founder or someone who had been brought into
The Pull of Charisma the company from the outside. Far from being a pre-
Charisma wasn't always as important in business as it is dictable organization man, he was expected to offer a vi-
today. For the three decades following World War Il-in sion of a radically different future and to attract and
what has been called the era of managerial capitaUsm- motivate followers for a journey to the new promised
the typical CEO was an "organization man" who worked land. In keeping with the religious conception of the
his way up the ranks and was no better known to the gen- CEO's role, the charismatic leader was also supposed to
eral public than his secretary or his dentist. All that have the "gift of tongues," with which he could inspire
started to change in the 1980s, when a long-standing de- employees to work harder and gain the confidence of
cline in corporate profits ushered in today's era of investor investors, analysts, and the ever skeptical business press.
capitalism. Senior managers -once viewed as enlightened Finally, in all too many cases, the charismatic leader was
corporate statesmen - began to be portrayed by disgrun- supposed to have the power to perform miracles-to
tled investors as an insulated, self-interested elite, ill pre- bring a dying company back to life, for instance, or to van-
pared to face the challenges of global competition and quish much larger, more powerful foes.
rapid technological change. Investors were suddenly look- It can, of course, be quite exhilarating for an organi-
ing for CEOs who could shake things up and put an end zation when such a leader appears. Whatever else they
to business as usual. may be, charismatic CEOs are not dull. But as many
This important change coincided with two other shifts. companies have found, there's a downside to superstar
The first was the emergence of an almost religious con- CEOs. Like its close relative, romantic love, charisma can
ception of business, exemplified by the appearance of be blinding. And the consequences of that blindness
words such as "mission,""vision," and "values" in the cor- can be severe.
porate lexicon. The second shift was the rise of so-called
populist capitalism, whereby ordinary Americans made
investing the country's most popular participatory sport. The White Knight Trap
To serve the public's growing appetite for business news, Our fervent and often irrational faith in the power of
the mass media greatly expanded coverage of corporate charismatic leaders seems to be a part of our human na-
doings, focusing-as always-on personalities and easily ture. The charismatic illusion is fostered by tales of white
comprehensible narratives. knights, lone rangers, and other heroicfigureswho rescue
In this environment, a new breed of corporate leader- us from danger. Major events are easier to understand
today's charismatic CEO-began to appear. Lee iacocca, when we can attribute them to the actions of prominent
who was elected chairman and CEO of Chrysler in 1979, individuals rather than having to consider the interplay
of social, economic, and other impersonal forces that
Rakesh Khurana is an assistant professor of organizationalshape and constrain even the most heroic individual ef-
forts. Sociologists and social psychologists refer to this
behavior at Harvard Business School in Boston. He is the au-
thor of Searching for a Corporate Savior: The Irrational common tendency to overestimate the impact of individ-
Quest for Charismatic CEOs, to be published in October by uals as the "fundamental attribution error," and American
Princeton University Press. society, with its mythology of frontier heroes, pioneering
SEPTEMBER 2002 63
The Curse of the Superstar CEO
were bought now should be chucked.... " ' •" ' on the other hand, was more consensus-
[As an insider], you are part ofthe pro- oriented. He felt that Bank One needed
cess. .. .You turn to an outsider and then to be stabilized and that its executives
you can watch the blood spray. You don't needed a rest from the turmoil that had
While charismatic
see many examples of internal candi- resulted ffom the merger and McCoy's
dates getting to the top of the system leaders (whether in departure."
and then laying waste to the existing Clearly, the committee's standards did
culture." religion, politics, or not refiect a half-century's worth of wis-
The belief in the superiority of outsid- dom about achieving organizational ef-
elsewhere) may appear
ers further constrains corporate boards ficiency through rational management.
in hiring CEOs. Consider the search that at any time, they most (By what measure, one is tempted to
led to the March 2000 appointment of ask, is seeking stability and consensus
Jamie Dimon as CEO of Bank One. In often emerge-or are a waste of time?) Rather, the values at
1999, Bank One was stumbling in the work here stem from a mistaken belief
wake of its recent acquisition of First
called intoexistence- that complex organizational problems
Chicago NBD. Many of Bank One's prob- during a crisis. can be solved by a charismatic outsider.
lems stemmed directly from the diffi- In the case of Jamie Dimon, the jury is
culty of melding the operations and cul- still out. He may succeed; he may not.
tures of the two banks. As performance But one thing is clear: Bank One's per-
declined, a revolt led by board members from the former ceived need to usher in change while playing it safe
First Chicago ended with the firing of John McCoy, Bank narrowed its sights in the search for a new CEO. The
One's illustrious CEO. Although the former First Chicago board in effect cheated shareholders by rushing to
directors favored appointing Verne Istock, who had been choose the usual suspect-the bold outsider-even if it
CEO of First Chicago, other board members wanted some- meant ignoring better candidates.
one with greater presence to impress Wall Street. They
wanted a superstar. Not surprisingly, the search focused
on external candidates, and on one in particular: former The Destructive Impulse
Citigroup president Jamie Dimon. The cult of the outsider is so strong that even when in-
Dimon was already a legendary figure on Wall Street siders are appointed to the CEO post, they are often peo-
by virtue of his long association with - and dramatic firing ple who have assumed the traits of outsiders. GE's Jack
by-Sandy Weill, with whom he had built the Citigroup Welch and Ford's Jacques Nasser, for example, were both
empire. Having spent virtually his entire career as a deal career employees of their respective companies who be-
maker on the investment banking side of financial ser- came known for their willingness to "lay waste" to parts
vices, Dimon had all the mental quickness and chutzpah of their organizations. Enron's Jeff Skilling was another
essential to success in that world. But those were not the longtime insider who claimed the mantle of a charismatic
traits traditionally valued in commercial and retail bank- leader. He succeeded in doing so by advancing his auda-
ing, indeed, in many ways Dimon was a strange choice for cious vision of transforming Enron fi-om an owner and
an organization such as Bank One. He didn't have much operator of natural gas pipelines to an "asset-light" new
experience with retail banking or credit card operations, economy company and by converting people to his cause.
two of Bank One's largest businesses-the latter the source The common thread in the stories of these three CEOs -
of many of the bank's operational problems. Known for and in the stories of most charismatic leaders, whether
his hot temper, Dimon also seemed ill suited to bridge the they are insiders or outsiders-is that they deliberately
differences between Bank One's freewheeling, entrepre- destabilize their organizations. In some cases, as with GE,
neurial culture and the far more traditional banking cul- the de stabilization can bring much-needed changes and
ture of First Chicago. result in a more vibrant company. In other cases, as with
Despite Dimon's apparent drawbacks, he dazzled Bank Ford, it can do more harm than good. In still other cases,
One's directors. Following a two-hour presentation he as with Enron, it can be disastrous. In all instances, how-
made to the board's search committee, outside director ever, destabilization carries great dangers.
and committee chair John Hall summarized his col- First, consider the problem of CEO succession. Indeed,
leagues' reaction: "Everyone knew he was brilliant, but one ofthe biggest challenges facing Welch's heir, Jeffrey
the presentation showed just how brilliant he was." Immelt, is avoiding constant comparison with his larger-
Another member of the search committee enthused that than-life predecessor, even as he is forced to deal with
Dimon was the kind of leader who "would not waste the disappearance of the "Welch effect," which pushed
time getting stability and consensus, but instead would do up the company's stock price during Welch's tenure.
what it took to make us the number one bank...Istock, Even at GE, which is famous for having a formal intemal-
SEPTEMBER 2002 65
The Curse of the Superstar CEO
succession process (although the new ismatic leader involves more than merely
CEO is still, in the end, selected by the acknowledging his skills-it requires full
outgoing one), passing the torch from surrender.
one leader to the next is fraught with dif- Enron may seem like an extreme ex-
ficulties. Because no chief executive stays
Today's extraordinary
ample, but the list of organizations badly
in the post forever, any system of author- trust in the power of crippled by charismatic CEOs includes
ity based on the power of an individual some of the most respected names in
will ultimately be unstable. Organiza- the charismatic CEO American business. Xerox under the
tions that depend on a succession of char- leadership of Rick Thoman-a top IBM
ismatic leaders are essentially relying resembles less a
executive whom the Xerox board hoped
on luck. mature faith than it had caught some of Lou Gerstner's
Jacques Nasser illustrates another dan- magic-provides a particularly sad ex-
ger of charismatic CEOs. On being ap- does a belief in magic. ample. Michael Armstrong's perfor-
pointed CEO of Ford in 1999, Nasser was mance at the helm of AT&T thus far has
hailed by BusinessWeek as a "restless, not been much more inspiring. Time
Lebanese-bom outsider," who "early on and again over the past 20 years, corpo-
showed the impatience with Ford's bureaucratic fiefdoms rate boards have seen the superstars they had hoped
that still fuels him today." The charismatic leader of would be saviors tum into black holes that sucked the
Nasser's type stands in opposition to the past and in op- energy and purpose out of their organizations.
position to tradition. This kind of leader proclaims the
company's destiny - usually in the form of a seductive vi-
sion-and demands that all roadblocks be removed. A New Era?
Today, in the troubled wake of Nasser's two-and-a-half- The decades that saw the rise and apotheosis of the charis-
year reign. Ford is struggling to return to its roots as a matic CEO were not notable for skepticism. In the 1980s,
high-quality manufacturer and a good employer. Its or- Ronald Reagan convinced Americans that they could
ganization has been damaged not only by the mishan- have lower taxes, increased govemment spending, and
dling of the Ford Explorer-Firestone disaster but also by balanced budgets, thus leading the way to the biggest
Nasser's countercultural focus on things like a forced- deficits in the nation's history. In the 1990s, a parade of
curve performance system for employees. pundits and gurus told us that the Intemet was changing
Lastly, the destructive impact of a charismatic leader all the mies. Venture capitalists poured billions into wing-
can be seen in Jeff Skilling's ill-fated career at Enron. and-a-prayer enterprises with no serious plans for making
In this case, the demands of the leader induced blind money, while ordinary investors drove the Dow Jones and
obedience in his followers. As we now know, Skilling's the Nasdaq to unsustainable heights at the behest of an-
abilities as a new economy strategist were considerably alysts who claimed to see a pot of gold at the end of every
overrated. What he clearly excelled at, however, was rainbow. It was, in many respects, an age of faith-a faith
motivating subordinates to take risks, to "think outside that was also expressed in the extravagant hopes and
the box" - in short, to do whatever pleased him. One for- expectations invested in charismatic CEOs.
mer Enron executive has described the upper managerial
ranks of the company as a"yes-man culture." CFO Andrew Faith is an invaluable, even indispensable gift in human
Fastow-the alleged designer of the off-the-books part- affairs. In the realm of religion, it is said to move moun-
nerships that proved central to Enron's downfall-was so tains - scarcely an exaggeration when we consider its
enamored of Skilling that he reportedly named one of his power to make people believe in and work for the tri-
children after him and hired the architect who designed umph of good in a world of guilt and sorrow. In the sphere
the CEO's Houston mansion to design his house. of business, the faith of entrepreneurs, leaders, and ordi-
Enron's board of directors also bent to the will of its nary employees in a company, a product, or an idea can
charismatic leader when it agreed to suspend its code unleash tremendous amounts of innovation and produc-
of ethics to allow top executives to participate in the off- tivity. Yet today's extraordinary tmst in the power of the
balance-sheet partnerships. Yet almost to the bitter end, charismatic CEO resembles less a mature faith than it
Skilling wowed investors and analysts at gatherings that does a belief in magic. If, however, we are willing to begin
one analyst likened to revival meetings. As Skilling's rethinking our ideas about leadership, the age of faith
example illustrates, charismatic leaders reject limits to can be followed by an era of faith and reason. 9
their scope and authority. They rebel against all checks
on their power and dismiss the rules and norms that Reprint R0209D
apply to others. As a result, they can exploit the irrational To order reprints, see the last page of Executive Summaries.
desires of their followers. That's because following a char- For more on this topic, go to http://explore.hbr.org.