One thing I have learned through the years with my businesses –  the better the team, the better the performance.

A new paper emerging out of higher education would seem to support that.

Ignoring the harm that narcissistic leaders can cause is perilous, suggests Charles A. O’Reilly III, the Frank E. Buck Professor of Management at Stanford Graduate School of Business. “We see the 10 percent of narcissists that succeeded and call them visionaries,” he says. “We’re not looking at the 90% who flamed out and caused irreparable damage. By talking about narcissism as though it might be positive, we’re not paying attention to how dangerous these people can be.”

In the paper, O’Reilly and two researchers from the University of California, Berkeley, Haas School of Business, Jennifer Chatman and Bernadette Doerr, examine the kind of company culture that narcissists inspire. Through a series of field tests and surveys, they show that narcissistic managers tend to prefer and create organizational cultures with less collaboration and lower integrity, and that their subordinates are more likely to act accordingly. Past research has shown that narcissists are more likely to seek out leadership positions in the first place — and that they are more likely to lie, cheat, and steal, according to the authors.

“If you deal with a narcissist, it can be unpleasant. If you’re married to one, it can be damaging. But fundamentally, individuals can choose to walk away,” O’Reilly says. “When narcissists assume positions of power, their effects become hugely magnified.”

Understanding the Narcissistic CEO

O’Reilly and his colleagues studied the sort of corporate culture narcissists are likely to cultivate through a series of surveys of over 700 adults through Amazon’s Mechanical Turk. In each case, they assessed participants’ level of narcissism — often associated with traits like arrogance, self-centeredness, and a lack of empathy — and leadership style. The researchers found that people who were more narcissistic were significantly less likely to value integrity and collaboration. For example, they were less prone to agree with statements such as, “I treat people with care and respect,” “I practice what I preach,” and “It is important to maintain harmony in the team.”

They also found that more narcissistic people were likelier to support policies and behaviors that reduced collaboration and integrity, such as being willing to look the other way on violations of company policy or promote people who were less ethical. Finally, they concluded that people hypothetically working for a more narcissistic CEO would make recommendations that reflected less collaboration and integrity, such as being less likely to suggest policies or promotion of candidates who embodied these qualities.

“Lots of studies show that companies with cultures that are less collaborative and have lower integrity are more likely to get in trouble and violate laws,” O’Reilly says. Other studies have shown that narcissistic CEOs are more likely to get bogged down in lengthy litigation and manipulate earnings. O’Reilly and his colleagues are currently designing a study that will explore whether more narcissistic CEOs, as rated by their corporate boards, are more likely to run afoul of the law.

In the meantime, O’Reilly urges boards to distinguish carefully between true visionaries and harmful personality types when hiring executives. “Because the prototypic visionary leader profile is so similar to that of a narcissist, if boards aren’t careful, they’re going to end up choosing people who are narcissistic as CEOs,” he says.

That doesn’t mean boards need to start administering personality tests: “A more direct way is not to hire anyone unless you have lots of data from previous subordinates about how they were treated. If the person stole people’s ideas, abused people, or was impulsive, those are all earmarks of narcissists.”

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