Why you should avoid charismatic leaders

(MoneyWatch) I've written about the perils of narcissistic leaders. They're dangerous because they want the applause that ensues after big dramatic gestures and that inclines them to heroic strategies that make their companies far more volatile. But what about charismatic leaders -- doesn't every company want to find its own Steve Jobs?

No, at least not according to Christian Stadler, writing in MIT's Sloan management review. I like Stadler's work because, as you might expect of a European, his sense of history is more than a week long and he's interested in the patterns and lessons it can offer. Surveying 100 years of European business leaders, he found that leaders of high-performing companies were not charismatic -- at least not as charismatic as the leaders of companies that did worse. He argues that the problem with charisma is that you can persuade just about anyone to do anything -- even when it's crazy.

Poster child for the perils of charisma is Michael Frenzel, Chief Executive of TUI AG, Europe's largest travel agency. When he got the top job, the company main business lay in commodities and steel. But this was too boring for Frenzel who divested himself of those "old economy" businesses and instead went pell-mell into the travel business. The timing was wrong, the strategy was flawed and in 15 years, TUI shares lost almost 60 percent of their value.

This reminds me of Jean Marie Messier, known to many of his erstwhile followers as J6M -- the 6 Ms standing for Marie Messier Moi Meme Maitre du Monde, or Messier myself master of the universe. His brilliant idea was to turn his water company into an global multimedia business, something he knew nothing about. But he had the charisma to persuade his board, his shareholders and the French government that his was visionary leadership -- until the day it wasn't.

How do you spot a charismatic leader? Most people will say you know them when you see them but if in doubt, go looking for award winners or the CEOs most frequently decorating the covers of magazines. According to Stadler, six out of the last 18 Chief Executives who won the title "Manager of the Year" in Germany presided over huge strategic blunders. By contrast, he says, you can spot the "intelligent conservatives" who are the better bet. They're most likely to be insiders who know the company from top to bottom. And in a meeting, they always stand out because they're the ones doing all the listening.

  • Margaret Heffernan On Twitter»

    Margaret Heffernan has been CEO of five businesses in the United States and United Kingdom. A speaker and writer, her most recent book Willful Blindness was shortlisted for the Financial Times Best Business Book 2011. Visit her on www.MHeffernan.com.

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