Abusive CEOs Derail Innovation and Performance
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CEOs with a verbally abusive leadership style have a profoundly negative effect on an organization’s top management team (TMT), undermining innovation and performance, according to an Academy of Management Journal article.
What’s more, abusive CEOs at organizations that engage in more philanthropic initiatives have even worse effects on TMTs, hampering innovation and performance even more.
The article, “The Interactive Effects of Abusive CEOs and Philanthropic Corporate Social Responsibility on Organizational Innovation and Performance,” is based on two separate experiments using:
Questionnaires among CEOs, chief operating officers, and chief marketing officers at 308 small and medium-sized enterprises (SMEs) in East China in 2018
Multiple surveys among 287 CEOs and 972 TMT members at 287 SMEs in high-tech industrial parks and enterprise associations in five major Chinese cities (Hefei, Nanjing, Shanghai, Shenzhen, and Suzhou) in 2022
Impeding TMT effectiveness
Abusive CEOs of organizations involved in philanthropic corporate social responsibility (CSR) initiatives have such negative effects because TMT members tend to perceive a glaring inconsistency in the CEO’s treatment of them compared to that CEO’s behavior toward external stakeholders when communicating the organization’s laudable philanthropic goals, according to coauthors Jingfeng Yin of Hong Kong Polytechnic University; Ying Wu and Robert C. Liden, both of the University of Illinois Chicago, Donald Kluemper of Texas Tech University; Steve Sauerwald of the University of Houston; and Jibao Gu of the University of Science & Technology of China.
The gap between the ideals of the CSR-oriented organization and the reality of being verbally abused by its leader hurts morale and diminishes the extent to which TMT members:
Collaborate. A CEO’s abusive behavior can erode trust among TMT members, making them less likely to collaborate effectively.
Share information. TMT members may become reluctant to share information openly due to fear of the negative repercussions in an overly competitive or toxic work environment.
Seek consensus. A hostile leadership style can create conflicts and divisions within the team, leading to less effective, more fragmented decision-making processes.
Collaboration, information sharing, and consensus-seeking collectively contribute to the overall effectiveness and cohesion of the TMT, fostering an environment conducive to innovating and improving organizational performance. But if one or more of those elements is missing, innovation and performance are likely to suffer.
“In the case of philanthropic CSR organizations, there’s a psychological impact on the top management team members from the abusive supervisor, which is augmented or enhanced by the hypocritical nature of the CEO signaling externally positive things, but then being negative internally, so that interaction effect makes the situation worse,” Kluemper said.
“Not only do the effects of abusive supervision trickle down from the CEO to the top management team, but it actually trickles up and has organization-level impacts on performance, which hasn’t been shown as an outcome of abusive supervision before this article,” he added.
“Especially among top managers, there’s a perception that CEOs are all-influential and really the most important person—that’s sometimes referred to as the romantic view of leadership—and what we really show with this research is that the entire top management team working together is crucial,” Sauerwald pointed out.
“The leadership style of the CEO is really important to manage these relationships between the top leader in the organization and the rest of the top management team, but we have a more balanced view of what really matters in organizations, and TMT behavioral integration is paramount to maximize performance and innovation.”
Impeding employee effectiveness
The effects of a CEO’s abusive leadership style on rank-and-file employees are multifaceted, and again, worse at organizations that engage in more philanthropic CSR.
Morale:
• When a TMT, under the influence of an abusive CEO, fails to collaborate effectively and share information, it sets a negative tone for the entire organization, decreasing morale among employees.
• Employees may experience higher levels of stress and anxiety due to the lack of support and increased workplace tensions.
Performance:
• A hostile leadership environment and poor integration within the TMT can trickle down to hurt employees’ job performance. When employees perceive that their leaders are not working cohesively or face abuse, it can lead to disengagement and lower productivity.
• Poor morale and reduced job satisfaction often result in higher turnover rates, which increase recruitment costs and further disrupt organizational performance.
Innovation:
• Innovation thrives in environments with collaboration, open communication, and trust. Abusive leadership and a fragmented TMT undermine these conditions, stifling creativity and innovation among employees.
• In a toxic environment, employees may become more risk-averse, fearing negative repercussions for proposing new ideas or challenging the status quo.
Abusive leadership vs. servant leadership
“The previous abusive supervision literature has been focused almost exclusively at lower and middle levels of the organization, and this research is showing that CEO abuse has the same kinds of negative implications at the highest levels of the organization, specifically on the top management team,” Liden said.
“Servant leadership is the antithesis of abuse, but Steve Jobs was abusive, and look at how successful Apple was under his leadership. That said, how much more successful could they have been had he been more of a servant leader instead of being abusive?” he said. “And indeed, Apple has enjoyed even more success with a more compassionate leader, Tim Cook, so that’s another takeaway from our research.”
Published: 07/23/2024
