what makes power hungry bosses tick? and what can be done about it?
From Enron and Tyco through to WorldCom and Lehman Brothers, the world’s biggest corporate collapses usually have one thing in common: power hungry bosses. Credit: Shutterstock

Most people have dealt with power-hungry bosses at one time or another.

Several behaviors typify these kinds of leaders. For example, they may blame others for their mistakes, they like to take credit for others’ ideas and work, and often belittle those who do not support them or put down others who do not share their views.

Another common trait of such leaders is their need to maintain power and control through hoarding the “rights” to make important decisions in their organization.

Not only does this process disenfranchise workers and disempower managers on the frontlines, but it can have potentially significant and far-reaching consequences for organizations.

For example, the world’s biggest corporate collapses—from Enron and Tyco through to WorldCom and Lehman Brothers, usually have one thing in common: a centralized organizational structure that concentrated power into the hands of executives who stifled the free flow of information and retained the right to make critical business decisions.

In such cases, there was often a whistleblower at a local level who knew something was going horribly wrong, but when they raised the alarm, they were ignored or overruled and effectively silenced by those higher up in the organizational food chain.

“I’ve seen plenty of folks hoard decision rights,” said Richard Holden, Professor in the School of Economics at UNSW Business School, who recently co-authored a research paper on the issue: Organizations with Power-Hungry Agents together with Wouter Dessein, Eli Ginzberg Professor of Finance and Economics at Columbia Business School.

The research paper found that such behavior is more common than most realize, and Prof. Holden said power hungry bosses are motivated by a number of factors. “Part of it can be put down to more or less nefarious explanations,” he said.

“There is one group of people who might have some kind of narcissistic personality disorder, and we can all probably think of examples of that. And there are other people who have ‘rules of thumb’ that got them where they are in order to be successful.

“And then some people just don’t trust others and like to do things themselves; there’s nothing that’s necessarily or deeply profoundly psychologically problematic about that—it’s just the way some people are.”

What damage can power-hungry bosses do?

While “power hungry” sounds like a value-laden term (and to some degree Prof. Holden said it is), he explained that the evidence discussed in the research paper is from carefully designed and executed laboratory experiments, and these found that the hoarding of decision-making rights among organizational leaders is a fairly widespread phenomenon.

Furthermore, the hoarding of rights to make decisions tends to be most severe at the top of organizations—and this has potentially significant commercial implications for organizations.

Chief among these is that leaders who retain decision-making rights are willing to sacrifice their organization’s expected earnings to retain control.

In addition, organizations with power-hungry leaders tend to be too centralized in their structure, while the presence of such managers also results in a flattening of the organizational hierarchy and smaller, less integrated firms.

“If you can think back to a time when banks had branches with local managers, it has been very well-documented that they are much better at assessing credit risks than people back in head office, for example.

“Similarly, people in an academic department at a university probably know more about who the best people are in their particular field (such as a certain branch of anthropology or a certain branch of mathematical number theory) than people in the central administration of the university. This principle is roughly true in almost every organization throughout the economy.”

Prof. Holden said multinationals are more likely to experience this problem. He gave the example of a study of 100,000 IBM employees across 50 countries in the 1970s, which documented substantial variation in cultural attitudes toward hierarchy and authority.

This study found that the larger and more dispersed an organization is (either geographically or based on industries), the more likely it will have leaders who tend to centralize decision-making rights.

What can be done to stop power hungry bosses?

As part of their study, Prof. Holden and Prof. Dessein developed a framework that models answers to a number of important questions for organizations, such as:

What is the optimal number of layers in an organizational hierarchy?When do middle managers destroy value?What is the optimal scope of a firm?

While the answers to the above questions will differ for each organization, Prof. Holden said the implications for boards (and the actions they should take) around power-hungry leaders are more consistent.

“This is a job for the board,” said Prof. Holden, who explained the first and most important consideration is to be careful who they choose as CEO.

“Is the candidate they have in mind a ‘power-hungry decision-rights hoarder’? That could be bad news for the organization. When it comes to making decisions, are they a hoarder or not? Are they a good delegator or not? And since there’s an underappreciated downside or drawback to having a hoarder in charge, you may want to think carefully about that dimension of who you’re choosing.”

Another solution for boards to power-hungry leaders providing direct rewards or incentives for delegation. These rewards might come in different forms, including benefits from structuring the organization in a certain way.

“At the board level, they need to be quite explicit about the kind of formal authority that is delegated to say, divisional managers, or the amount of authority that is delegated below the CEO. Obviously, the CEO has to be in charge and you can’t undercut their authority.

“But there are ways that you can think about financial delegations, for example, in that can be they can be decisions that can be made at the board level,” said Prof. Holden.

These might be decisions about limits on capital expenditures, acquisitions or divestitures, for example, which place formal thresholds on certain kinds of decisions and the potential impact they could have on an organization.

“So those are the things that boards can do, and it’s really a challenge for board directors to take up,” Prof. Holden concluded.

The study was published in The Journal of Law and Economics. More information: Wouter Dessein et al, Organizations with Power-Hungry Agents, The Journal of Law and Economics (2022). DOI: 10.1086/718852 Journal information: Journal of Law and Economics

Provided by University of New South Wales Citation: What makes power hungry bosses tick? And what can be done about it? (2022, August 23) retrieved 23 August 2022 from https://phys.org/news/2022-08-power-hungry-bosses.html This document is subject to copyright. Apart from any fair dealing for the purpose of private study or research, no part may be reproduced without the written permission. The content is provided for information purposes only.

TECH NEWS RELATED

Amazon sued in US for 'stealing' delivery driver tips

ETtechThe District of Columbia on Wednesday said it is suing Amazon for allegedly stealing tips from its Flex service delivery drivers to reduce labor costs and boost profits.The lawsuit accuses Amazon of breaking local law regarding deceptive trade practices and came despite the company having already compensated drivers as part ...

View more: Amazon sued in US for 'stealing' delivery driver tips

Save 10% on Peak Design’s Phone Cases, Tripods, and More

Justin Duino / Review Geek Now’s your last chance to get a discounted phone case, tripod, bike mount, or backpack from Peak Design. The oh-so-modular company is offering a 10% discount on all of its products, closing out 2022 with a bang. This four-day sale ends the morning of ...

View more: Save 10% on Peak Design’s Phone Cases, Tripods, and More

Microsoft adds Communities to Teams

(Image Courtesy: Microsoft) Microsoft has announced the addition of Communities to its professional Instant Messaging (IM) client Teams. The Redmon technology and hardware major announced that the feature will be added to the free versions of Teams, expanding to the widest possible audience. “Whether your group is a recreational ...

View more: Microsoft adds Communities to Teams

Gobi Partners appoints Carlo Chen-Delantar as new Head of ESG

Gobi Partners, the Malaysia and Hong Kong-based venture capital firm, has appointed Carlo Chen-Delantar as its Head of environmental, social, and governance ESG, to further advance the company’s ESG agenda. Gobi Partners said in a statement that Carlo will replace its outgoing ESG Head, Paul Ark. Prior to this ...

View more: Gobi Partners appoints Carlo Chen-Delantar as new Head of ESG

Washington DC Sues Amazon for Withholding Delivery Drivers' Tips

Amazon is facing a lawsuit for allegedly withholding delivery drivers of their tips. According to Engadget, the retail company is being sued by the District of Columbia over claims that the company was “stealing” tips from Flex drivers. According to Washington DC Attorney General Karl A. Racine, the company engaged ...

View more: Washington DC Sues Amazon for Withholding Delivery Drivers' Tips

San Francisco Reverses Vote On Killer Police Robots Following Public Backlash

The city supervisors in San Francisco are backtracking on their initial vote to let police robots deploy brutal force during San Francisco Police Department (SFPD) operations due to massive backlash. Following discontent from the communities and activist organizations, the Board of Supervisors, who voted 8-3 for the policy, now ...

View more: San Francisco Reverses Vote On Killer Police Robots Following Public Backlash

Financing startup Klub on boards Anuj Berry as entrepreneur in residence

ETtech Anuj Berry Revenue-based financing startup Klub has brought on board Anuj Berry as an entrepreneur in residence. In his new role, Berry would be responsible for driving key global initiatives for the company.“Our aim is to become India’s most loved capital platform and we are excited to have Anuj ...

View more: Financing startup Klub on boards Anuj Berry as entrepreneur in residence

Construction tech startup Onsite raises seed funding

ETtechAbeyaantrix Technology, the parent entity of Onsite, a mobile-based application for construction projects, on Thursday said it has raised $1.5 million in a seed funding round from Artha Venture Fund, Foundamental and Madhumala Ventures, among other investors.The company, which was founded last year, will use the funds for product development ...

View more: Construction tech startup Onsite raises seed funding

AI, quantum computing see rising demand, says DIGITIMES Research

Why 21 cm is the magic length for the Universe

Watching viruses fail

Twitter and its heavy digital carbon footprint

Ashneer Grover, Madhuri Jain issued summons by Delhi HC in legal battle against BharatPe

Want to work in data science? 3 great jobs hiring now

Epic Games Introduces Restricted Account for Kids in Fortnite, Rocket League, Fall Guys

New Research: Your Choice of COVID Vaccine Can Increase Your Risk of Myocarditis

Alcatel-Lucent Enterprise and Gur Lavi accelerate digital transformation in the Philippines

Asia's largest offshore platform put into operation in south China

Realme 10 Pro series launching in India today: How to watch the livestream, what to expect

Meta introduces Facebook like 3D avatars on WhatsApp

OTHER TECH NEWS

Top Car News Car News