Why Do Incompetent People Become Business Leaders?

(Image credit: Esther Moreno (Esther Moreno (Photographer) - [None])

If you have ever had a manager, or perhaps even your CEO, who was not only incompetent but dishonest, manipulative, narcissistic and a first-class jerk and wondered how such a person could have attained their position, you are not alone.

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And, you’ve likely wondered if this phenomenon — people with Jekyll and Hyde personalities being promoted into positions of power — is something new, or has it always been that way? Are we simply more aware of sick people who run giant corporations, sometimes into the ground, or who represent us in government?

There is an answer, according to a fascinating new book called Why Do So Many Incompetent Men Become Leaders? Almost every page provides an aha moment. In his book, psychologist Tomas Chamorro-Premuzic reveals how we are looking at the wrong things when choosing a leader or promoting an employee to upper management.

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Pizazz Leads to Disaster

“We are not good at evaluating leadership potential. Too often, the way we choose leaders and evaluate personnel for advancement is often based on pizazz: charm, exhibiting confidence, intelligence, extroversion and charisma,” the author maintains, “instead of humility, empathy and a demonstrated ability to lead successfully.”

Just look at some of the disasters chosen as CEOs who destroyed their companies: Enron, WorldCom, WeWork and so many more. I asked, “How could such nightmares have been selected?”

Chamorro-Premuzic feels it is a combination of the following factors that makes us bad at evaluating leadership potential:

(1) For most of our evolutionary history, the world was very simple. We lived with the same group of 15 or 20 people all our lives, and leadership potential was about things that were directly observable — including curiosity, quickness and courage — so ultimately, we could trust our instinct.

“But as the world has become more complex the past 200 years, in selecting a leader we rely more on our intuition as it is harder to detect those attributes which make people more effective. The things we really need to evaluate today — creativity, empathy, intelligence, learning ability — you can’t just look at someone and say, ‘Yeah, this person has it or doesn’t.’”

(2) Charismatic, narcissistic psychopaths with Machiavellian tendencies often have social skills that allow them to manipulate others, literally becoming predators. We have enabled these people to prosper, because the way we select our business leaders is fundamentally flawed. Incentives put in place to motivate people to become executives promote and nurture greedy and self-centered behaviors.

(3) The person chosen might fail, or get another gig as a CEO, as they face few consequences of their own poor performance. Add to this gross overcompensation, and it is not difficult to see that we are rewarding wrong behaviors, which is doing great harm to our nation.

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How Can Organizations Do Better? What Should Employees Look For?

“Employees must look for a place to work that has the better culture, rather than on brand, salary or benefits, because those things wear out quickly,” Chamorro-Premuzic says. “You want to be where, if you work diligently and have talent, you are rewarded; a meritocracy, where the best people get promoted. You need to find out if this employer rewards talent. That is a key question.”

For an entrepreneur starting out and wanting to build a company that will be here for a century or more, the author believes there is a way:

“Two key concepts will assure success and out-performing their industry competitors,” he notes. “It is by becoming talent-centric and meritocratic. This means not promoting less-competent people to leadership roles. Companies that get it right will succeed, thrive, grow and still exist in 50 or 100 years, while the others will self-implode, like Enron, WeWork and many more.”

The author believes that we must foster competent leaders who:

Promote good cultures, and;
Behaviors where people are not just motivated to pursuing their own selfish interests, and;
Who respect others, respect the rule of law, and;
Those who do not are punished for being crooks and not rewarded.

“Bottom line is in the last several decades the way we have structured incentives has made it much more enticing for the types of individuals who aspire to these roles to reflect narcissism and psychopathy.”

Looking at the United States, is he confident as to where we are headed at present?

“There are mixed indicators. As only the top 5% or 10% of Americans have benefitted from enormous increases in salaries, while the rest have remained stagnant, it is hard to be confident. Every time there has been inequality to a staggering degree in history it has led to some kind of unrest or revolution.

“However, to the degree that big corporations are aware of this issue, they can change, becoming more socially responsible to their employees and the public.”

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Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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After attending Loyola University School of Law, H. Dennis Beaver joined California's Kern County District Attorney's Office, where he established a Consumer Fraud section. He is in the general practice of law and writes a syndicated newspaper column, You and the Law. Through his column, he offers readers in need of down-to-earth advice his help free of charge. "I know it sounds corny, but I just love to be able to use my education and experience to help, simply to help. When a reader contacts me, it is a gift."