Dark Side of Discretion

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Research Report

The Dark Side of Discretion
Robert B. Kaiser Kaplan DeVries Inc. Robert Hogan Hogan Assessment Systems

THE DARK SIDE OF DISCRETION Leader Personality and Organizational Decline Robert B. Kaiser Kaplan DeVries Inc. Robert Hogan Hogan Assessment Systems

Author Notes Rob Kaiser is a partner with Kaplan DeVries Inc. Robert Hogan is President of Hogan Assessment Systems. Correspondence concerning this article may be directed to either author at Rob Kaiser, 1903 G Ashwood Ct., Greensboro, NC 27455, rkaiser@kaplandevries.com or Robert Hogan, 2622 E. 21st St., Tulsa, OK 74114, rhogan@hoganassessments.com.

Revised and resubmitted for J. Antonakis, R. Hooijberg, J. Hunt, K. Boal, & W. Macey (Eds.) Strategic Leadership of Organizations May 2006

Copyright© Hogan Assessment Systems, Inc. 2006. All rights reserved.


Power tends to corrupt and absolute power corrupts absolutely. Great men are almost always bad men. Lord Acton Discussions of leadership typically glorify senior managers, a practice that seems increasingly suspect (Kellerman, 2005). This chapter examines the concept of discretion, defined as the degree of choice or "latitude of action" available to managers (Hambrick & Finkelstein, 1987). We propose that, although discretion is necessary for leaders to make positive contributions to their organizations, it also provides the potential for leaders to disrupt and destroy them. This dilemma has possible implications for the fate of organizations and even societies. Thus, given the tendency for academics to romanticize senior leaders, we focus on the dark side of discretion and how it links leader personality to organizational failure. Consider Harry Stonecipher, an executive at General Electric in the 1980s, an organization that tolerated, if not actually reinforced, his intimidating management style. Although he earned a reputation for integrity by taking strong positions on ethical issues, media accounts of his career at GE, and later at Sundstrand and McDonnell Douglas, indicate that his abrasiveness earned him many enemies. (The details of this case are based on several media reports, particularly Isidore, 2005.) Stonecipher joined Boeing in 1997 when it acquired McDonnell Douglas. He retired in 2002, but as Boeing's single-largest shareholder, he remained on the board of directors. In December of 2003, amid an ethics scandal that led to the resignation of the CEO, Phil Condit, and sent two other executives to prison, he returned as CEO. Wall Street approved of his return and Boeing's stock rose by 52% during his tenure. In the spring of 2005, Stonecipher's many detractors finally caught up with him. An anonymous letter informed the board that he was having an extramarital affair with another Boeing executive. According to the Associated Press, "The board concluded that the facts reflected poorly on Harry's judgment and would impair his ability to lead the company." Sonecipher was fired, and Boeing became the subject of yet another public scandal. This case illustrates three points about leader personality. First, personality matters—who leaders are determines how they lead, for better or worse. Second, personality flaws shape judgment and sometimes lead to ill-advised decisions; they also prompt behaviors that create enemies, alienate coworkers, and

Copyright© Hogan Assessment Systems, Inc. 2006. All rights reserved.


undermine teams. Third, leader personality is most consequential at the top, where there is great freedom of choice and much is at stake. This paper is organized as follows. First we review the literature on managerial discretion, which indicates that discretion moderates the relationship between leader personality and organizational performance. Second, we present a model for conceptualizing the links between leader personality and organizational performance. Third, we present a particular viewpoint on personality that may be useful in research concerning...
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