Charismatic leaders always succeed

What does a charismatic, visionary boss bring to a company?

brand eins: At the end of the nineties, investors, shareholders and customers trusted the dazzling visions of the future of some company leaders in the New Economy. After the collapse of many companies, there is now disillusionment in many places. After these experiences, why should one still trust a CEO who talks about visions?

Flynn: Because visions are not inherently bad, on the contrary. Investors, shareholders and employees value companies headed by charismatic leaders who exude trust, dominance and purposefulness and who have visions for the future of the organization. Especially when they are able to convey these visions to their followers in an understandable way and, with the help of their enthusiasm, to get others to follow these visions.

Together with Professor Barry M. Staw from the University of California, I examined company data such as the share value, growth or return on sales of 46 companies that are among the 1000 largest industrial or service companies in the USA and are stirred by CEOs who are considered visionary and charismatic according to the press and literature publications. When we compared these numbers with those of companies that are not run by charismatic leaders, our theses were confirmed: people are more likely to buy the shares of such visionary companies, investors are more willing to give capital and are more likely to accept risks with these companies.

What actually is a charismatic leadership style? Can it be recognized by outsiders and also scientifically defined?

So far, the main focus in science has been on the role and effects of such a leadership style within an organization. We have identified nine behaviors that correspond to such a leadership style: The CEO praises successes and performance, formulates a strategy for how to lead the company in the future, develops a vision that is clear and precise for his employees, expresses important things in simple words , shows its pride in the organization, shows self-confidence, encourages enthusiasm and spreads awareness of a common mission. It has been found that such a management style has a positive effect on productivity, satisfaction and identification with the company. In contrast, little attention has been paid to the external impact of a charismatic leadership style. It may well be that a CEO is perceived as a charismatic, visionary leader within a company, but not externally. And vice versa. For the image of a CEO outside the company, it is usually not so important whether he succeeds in retaining employees for the company or in following a company philosophy. From the outside it is noticed whether he succeeds, for example, in convincing a skeptical public to buy a new product or in building trust with customers, suppliers and investors despite a battered company image.

So it depends above all on public relations whether a CEO is also perceived as charismatic outside the company and thus benefits the company?

Of course, it is important whether and how what the CEO does is conveyed to the outside world. What is decisive, however, is what he actually does. For example, when Steven Jobs, Apple's CEO who is considered the prime example of a charismatic leader in business, speaks to people, he is talking about more than just selling computers. He talks about bringing ideas into the world. His job is less to do the day-to-day business than to make strategies transparent and to clarify which goals and visions he and the organization are pursuing. And that in an easy-to-understand language. With enthusiasm. And with pride in the company, his company. People understand him, accept him as a role model and therefore also believe in Apple.

Which then goes well until the first crisis comes and the visions turn out to be a mistake.

No. Often times, leaders are perceived as charismatic for the first time, even during a crisis - they suddenly appear as saviors who can save an organization, group, or even nation from disaster. In this situation, they can spread trust and proclaim visions. A very good example of this is the Mayor of New York, Rudolph Giuliani. Before the 9/11 attacks, who would have described him as charismatic and visionary? Probably almost no one. Suddenly, however, after the crisis gave him the chance to appear, he was celebrated everywhere and described as charismatic in the press. Because he took steps to fix the problems after the attacks. Because in uncertain times people focus especially on charismatic traits of a leader. And because most people overestimate his influence at such moments.

An example?

A mayor's success could be determined by the residents of a city, among other things, by whether he succeeds in lowering the crime rate. Most of the time, however, the crime rate depends to a large extent on the overall economic development of a country. This is a factor that the mayor has almost no control over. If he's lucky, the economy will grow during his tenure - and the population will attribute it to his leadership style when the crime rate falls. Followers then stylize him as a superman. Something similar happened to some CEOs during the Internet boom. Although some companies grew by themselves, their board members were hailed as heroes with sheer superhuman abilities. As a result, people are influenced in their judgment of whether a person is charismatic or not by what information is available to them about the control over these personalities.

The fact that people are suddenly perceived as heroes in times of crisis or boom does not mean that a charismatic, visionary management style generally steers a company better through a crisis.

That's true. However, we have found in our studies that such a management style not only convinces its own employees, but also people outside the organization, especially investors, better of goals and visions. Which is of course particularly advantageous in times of economic crisis and becomes particularly clear. Also because a charismatic manager influences the evaluation of information that affects the company. In an experiment, we gave test subjects information about possible future developments of products and strategies at Apple Computer. If we only gave out positive information, participants were willing to invest more on average than if we also gave out negative information - which seems logical. However, if the information came from Steven Jobs via video presentation, the participants always invested the same amount of money - even if they received negative information. Incidentally, such an effect is intensified if people have already had ties to the company or have placed their trust in it by buying shares, for example. The effect is similar to that of citizens, who are more likely to believe the promises made by politicians whose party they voted for in the previous election. Even with exactly identical statements from the opposing candidate. People have a need to act consistently. Even if, objectively, it may appear irrational in individual cases.

People are more likely to trust organizations when they have charismatic personalities at the top. Why then do you meet this type less and less?

In the past, the ability to lead was seen as a stable personality trait. Something that was put into your cradle, a power that was given, as it were, by God. Today leadership is understood as a socially negotiated process, as something that no longer only depends on the person who leads. One can only lead others if they let themselves be led. In order to be seen and accepted as a charismatic, visionary manager outside the organization, it is not only necessary, for example, to successfully introduce a product into a skeptical market, but also to remain true to one's visions and to continue to act consistently despite resistance or short-term changes in environmental conditions. This takes time and repetition. It is only very slowly and cautiously that organizations, shareholders, the media and society in general are rethinking - that we have to give managers this time and not yell at the slightest market fluctuations that they should throw their visions overboard . This is the prerequisite for us to be able to perceive CEOs as visionaries again and see them as role models for other people and society in general.

Provided, of course, that the visions are successful.

Of course, it can happen that charismatic CEOs succeed - possibly not even with bad faith - in getting people excited about ideas, visions or organizations that are not successful. Or that they put personal profit before that of the company. This is a risk and inevitable if we want to have personalities again who implement visions and guide people through today's times. However, I believe that investors and consumers have become more critical overall in recent years and are analyzing the visions more closely. Completely out of thin air and against all market data, a vision can no longer be, regardless of how much charisma the CEO exudes. Just as CEOs have become more cautious about their visions. At least until the next euphoria breaks out.

Perhaps today's board members simply no longer have visions or do not dare to develop them in a seemingly uncertain, complex and unmanageable world?

That is theoretically possible, but I don't even want to think about that. If a CEO is praised and accepted by his followers for long-term visions, then he will be able to develop more too. It's a question of reward, so to speak.

So it is possible to learn to think, speak and act in a visionary manner?

I am convinced of that. Not everyone will develop the charisma of Steven Jobs, but theoretically anyone can create visions and communicate them in understandable, convincing language. It would be important to train this ability at business schools and universities - and to reward the effort.

However, very few students make it to the top of a company immediately after graduation.

Sure, but the qualities of a charismatic personality are not ones to be suppressed at lower levels of the hierarchy. Showing self-confidence, spreading enthusiasm, being proud of the company in which you work, setting challenging goals and celebrating success - that is what you can do with every job in a company. Sure, visionary thinking is not as important at the lower levels in an organization as it is at the top. Still, you probably don't forget it on the way up. Especially not if you see that you are rewarded with higher positions.