Beware The Narcissistic Leader

CEOs with this affliction tend to be charismatic and confident, but, left unchecked, they often steer their companies into the abyss. Watch for these symptoms.

“Half the harm that is done in this world is due to people who want to feel important. They don’t mean to do harm, but the harm does not interest them. Or they do not see it, or they justify it because they are absorbed in the endless struggle to think well of themselves.”  — T. S. Eliot

The shiny, white Maybach sped through Manhattan carrying the brash but charismatic 6-foot 5-inch CEO eyeing the passing urban scenery as if he were royalty silently signaling his approval to adoring crowds. The smell of marijuana and Don Julio tequila followed Adam Neumann onto his $60 million Gulfstream G650 as he celebrated the infusion of $4.4 billion in capital into his company from Masayoshi Son, CEO of Softbank. So powerful was Neumann’s magnetic effect on people that Son reportedly made the investment after only a 12-minute walk around WeWork headquarters. For a company once valued at $47 billion, that moment marked both the apex of WeWork’s rise and the beginning of its precipitous decline. For Neumann—the now famously dethroned founder of WeWork—that was indeed a very good day. For the investors and employees of WeWork, it was but the first chapter in an unfolding tragedy.

Neumann is a true modern-day Icarus. His flamboyant and often highly questionable behavior that included egging employees on to take shots of expensive tequila at work and conducting middle-of-the-night meetings in the woods was only overshadowed by his grandiose ambitions. Neumann wanted an empire that stretched beyond WeWork into all aspects of human life, with lofty spinoff ideas named, “WeGrow,” “WeBank” and “WeSail,” among others.

The rise and fall of Neumann has been extensively chronicled, but the story of a narcissistic CEO taking investors for a very expensive and value-destroying ride is, sadly, not at all rare. One only need think of the recent headlines involving Uber, Wells Fargo and Theranos to start calculating the lost capital, the jettisoned employees and the toxic cultures to see how society suffers at the hands of self-centered and deeply insecure narcissistic leaders.

Attractive attributes abound

Many of the more productive characteristics of narcissism—self-confidence, charm, the ability to boldly articulate a vision for a company—are valuable and should be rewarded. The attraction of the narcissistic business leader is not hard to understand. This is a compelling figure who exudes confidence and often personal charisma, is clever and tenacious and is able to use language eloquently and powerfully to inspire investors and employees alike. Usually a fearless and confident risk-taker, CEOs and executives with these characteristics can appear to have the potential to create financial value by breaking convention. They have the audacity to answer big questions and champion big ideas. They capture our imagination and often our allegiance. With distrust in government, religious and other social institutions on the rise, people are increasingly looking to business leaders for inspiration, even meaning. And narcissistic CEOs are happy to be in that spotlight.

While these personality traits can positively impact a business’s ability to thrive, what we also know is that narcissistic CEOs always have a dark side. The dark side of the narcissistic leader is far less well understood, yet some of business and society’s greatest failures can be tied to these complex leaders. Investors and employees alike can lose money, reputation and careers because of this irresistibly seductive leader.

The dark side lurks

Preoccupied with visions of unlimited success—and their own causal role in it—narcissistic leaders see themselves as unique and very special people. They are interpersonal alchemists who turn their own lead into gold, often appearing wounded and self-pitying if others don’t appreciate their obvious genius and generosity. Such leaders are always over-promising. The combination of limited self-awareness and excessive arrogance is not only deadly for their investors, but CEOs with this personality type rarely learn. In fact, they are often markedly disinterested in learning. Their pervasive sense of entitlement and self-aggrandizement combined with an inability to apologize or admit a mistake can create bad business choices such as overpaying for acquisitions or driving M&A deals that don’t make prudent business sense.

But it is behind the scenes with colleagues and employees where the real damage occurs. Narcissists get you to believe in them and their idealized vision for the future. They draw people in emotionally and intensely. This frequently leads to the formation of two camps: those who are skeptical of their promises and may leave, and those who will follow them absolutely anywhere. Often, the quality of talent in these two camps will also vary greatly, with top talent leaving and weaker talent remaining. When I suggested to an otherwise savvy private equity investor that his leading candidate to be CEO of a $2 billion consumer products company was a narcissist, he got very angry with me, ignored my advice and hired the executive. Six months later the new CEO was gone, the portfolio company was in dire financial straits and the board bitterly realized it had significantly overpaid for the asset.

Arrogant leaders with a compelling vision are nothing new. Global business is filled with them. What makes these senior leaders dangerous and puts investor capital at risk is a combination of traits that are very difficult to observe until you’re looking in the rearview mirror. These include a profound lack of empathy for others, a desperate need for nearly constant praise and the inability to receive bad news. This last characteristic quickly creates a team of yes-people, undermining open dialogue and rendering the honest exchange of views impossible. One highly narcissistic CEO I worked with had a lieutenant who was so slavishly devoted to him that I was effectively given the choice of signing a loyalty oath or working elsewhere. I chose the latter option.

Narcissistic CEOs don’t attract top talent because the best people need respect and freedom. In fact, these narcissistic CEOs and founders further diminish value creation because the cultures that develop around them often resemble cults rather than healthy, high-performance organizations. And as for sustainability—both for the leader and his or her organization—just look at the WeWork example cited above.

Don’t fall for the vainglorious leader

Millions of dollars of value are destroyed every year because a narcissistic leader captures the imagination of people with a need to believe what is being sold and who unwittingly enable the flawed strategy. But you don’t have to take the bait. Investors, boards and other C-level executives can guard against this deception in several ways:

• Talk to former subordinates. This is NOT the time to trust your gut! Be sure to have honest, privileged conversations with former employees, colleagues, and CEOs. Ask about the candidate’s ability to learn, to admit and accept mistakes, to feel genuinely and compassionately for others. What kind of cultures do they create and what type of people follow them? Do they accept criticism well? Do they create a ‘loyalty oath’ culture? Who leaves their organizations and are those leavers the very best performers? Very thorough and pointed reference checking is a powerful tool to see behind the ingenious marketing and self-promotion of such individuals.

• Don’t skip the pre-hire outside evaluation. For narcissistic CEO and senior executive candidates, the suggestion that they go through a pre-hire evaluation will likely create an angry, offended reaction. Good! That tells you a lot of what you need to know about their personality. Genuinely confident leaders have no issue with an evaluation; in fact, they welcome it. Leaders with an inflated sense of self-worth, latent insecurity or excessive arrogance are always offended. As with anyone you would hire into a critical role, utilize an experienced and well-trained assessment specialist to conduct a very thorough evaluation that focuses on the expanse of their career, their development, the choices they’ve made and the impact they’ve had. This is vital data in predicting what kind of leader they will be in the future.

• Be hypervigilant to unethical behavior. Narcissists genuinely believe that rules do not apply to them, so act swiftly at the first sign of impropriety. At the first unethical – or worse, illegal – slip, consider termination or, at the very least, a thorough investigation. Narcissists play fast and loose with rules and consider themselves above the law. “Only the little people pay taxes,” Leona Helmsley famously said.

• Don’t let them control the narrative. Hold skip-level meetings, maintain contact with multiple layers of management, ensure that there are 360-degree reviews for all senior managers and empower a strongly independent chief human resources officer. The best CEOs welcome actions like these; those who have something to hide do not.

We are living through an epochal time of a pandemic, and CEO leadership is both on display and desperately sought out like it has never been before.

As we’ve seen, narcissistic CEOs can’t take the spotlight off themselves, don’t feel empathy and compassion for their people, and don’t manifest the commitment to the core values common to all decent people. Thank goodness for CEOs who are not impaired with this condition: leaders such as Arne Sorenson of Marriott, Stan Bergman of Henry Schein, and Bernard Arnault of LVMH, to name but a few. These business leaders and others like them do the difficult work of balancing the hard realities of keeping their businesses alive by compassionately supporting their people and looking for ways to improve our common good.

Perhaps more than any litmus test we could devise, a leader’s behavior during a crisis like the one we are currently in will truly reveal their character.