Transforming Toxic Leaders

Alan Goldman

• Publisher: Stanford Business Books
• Year: 2009
• ISBN:
  9780804772570
• Edition: 1
• Topic: Business
• Subtopic: Leadership
• Index: Business

Unlike other books written on "toxic leaders, " this book takes issue with the predominant view that "toxic leaders are bad" and destructive to their companies. Rather, the author argues that even highly productive leaders have some toxic qualities central to their success story. The book redirects the conversation about toxicity in a more productive direction, as toxic leaders are not just viewed as villains and liabilities, but are also considered as potential assets, innovators, and rebels.

Working on the premise that "toxicity is a fact of company life, " the book provides organizations with a model and blueprint on the advantages to be gained from skillful anticipation, control, and handling of troubled and difficult leaders. In contrast to dysfunctional organizations that ignore toxicity or dwell on the perceived destructive impact of toxic leaders, successful companies come up with resourceful, innovative strategies for turning seeming deficits into opportunities.

1

Demagogue to Dialogue

Bentley Pacific Engineering and North Country Solutions

Like the two-faced Roman god, Janus, the leader must always be looking both inwards and outwards, a difficult position . . . concentrating solely on one or the other is a more comfortable position but it undermines the role of the leader, and thus the strength of the institution’s representation in the outer world.

—A. Obholzer, The Unconscious at Work

DYSFUNCTIONAL DOWNSIZING INC.: BENTLEY PACIFIC

Late one Friday afternoon as engineers and staff were about to depart for the weekend, an e-mail terminating 273 employees suddenly appeared on monitors throughout Bentley Pacific Engineering, a firm based in Seattle, Washington. (As noted in the Introduction, I have changed the names of companies and individuals throughout the book to maintain client confidentiality and personal privacy.) Shock waves of disbelief welled up as deeply committed aerospace designers and administrative assistants attempted to grasp the full brunt of their dismissals. They were to pack up their belongings and move out of their offices before the start of the next workweek. The traumatic effect of the downsizing extended beyond those terminated to the remaining employees, who assumed that they would be next. Their colleagues had been the victims of a sudden act of organizational sabotage. How could they ever trust leadership again?

Monday afternoon in a hastily called meeting, Bentley CEO Cal Burton gave an obligatory, politically correct speech hitting on all of the cost-containment buttons. Burton’s speech was an act of shallow showmanship, pure cliché, and only served to deepen his employees’ wounds and mistrust. It was all about bottom lines, with no discussion of human capital or recognition of the emotion of his audience. Immediately following the CEO’s talk, twelve managers informed members of their respective divisions that the downsizing was still in progress, with further cuts inevitable. Meanwhile, both professionals and staff received an edict that they would be expected to rise to the occasion and perform at 125 to 150 percent of their usual levels in an effort to make up for the losses in productivity anticipated after the downsizing.

When the new rules of the game were questioned by angry and traumatized engineers, divisional managers were directed by CEO Burton to put down any rebellion by whatever means necessary. A number of verbal altercations occurred throughout the company, highlighted by a screaming and pushing match involving Burton and three remaining engineers from the R&D division. Grievances were filed against the CEO, with litigation pending. Further investigation involving consultation with the Bentley employee assistance program (EAP) director and an external management consulting group yielded that Burton was an easily agitated man for whom tantrum-style outbursts were not uncommon. His anger issues and temper resulted in increasingly turbulent behavior in the workplace.

PSYCHOLOGICAL ASSESSMENT OF THE CEO

The consultants collectively considered whether Burton’s individual behavioral patterns could be untangled and separated from the painful realities of a downsizing. Perhaps the downsizing was the true cause of all the Bentley conflict and agony? Clearly, companywide policies and unpopular but necessary fiscal decisions were major drivers of a dysfunctional system. Discussions determined that since there was no way of neatly separating a leader from the organizational system it made good sense to isolate Burton as the lowest-hanging fruit in this corporate debacle. All roads appeared to lead back to Burton. Why not determine whether he was the nexus of the crisis and do something about it?

After much deliberation, the Huntington-Bolger Management Consulting Group in conjunction with the Bentley EAP concluded that Burton’s issues required more in-depth mental and emotional assessment, and he was referred to Dr. Alexander Silverton, a leadership coach with a unique combination of management and clinical psychology expertise. Faced with a growing avalanche of grievances and lawsuits, both Bentley Pacific and the Huntington-Bolger Group were hopeful that individual leadership coaching and psychological assessment of Burton could yield insights into some companywide damage control. After three weeks of extensive coaching and assessment, Dr. Silverton reached a DSM IV-TR diagnosis of intermittent explosive disorder (American Psychiatric Association 2000, pp. 663–67; also see glossary). Apparently, Burton had both a brilliant and a dark history as a leader who was a mover and shaker, a CEO who was able to pull a company out of the dumps and into almost overnight profitability—but at the serious cost of demeaning and traumatizing scores of subordinates. With a fiercely hierarchical and authoritarian leadership style, Burton had a reputation as a mercenary and soldier of fortune; he had served as a “downsizing shark” and a “one-man cost-containment militia” for five companies over the previous twelve years. Curiously, Burton’s predisposition to extreme, exaggerated, and repetitive public displays of anger had been painfully apparent to a growing number of colleagues at Bentley Pacific, but the official diagnosis was not revealed to the company by Dr. Silverton. Although Dr. Silverton was hired by Bentley Pacific via a referral, Burton was legally protected by confidentiality and privileged communication provisions of the Americans with Disabilities Act as it applies to psychological and psychiatric diagnoses.

Burton continued with his leadership coach and eventually resumed his full-time duties as Bentley’s practicing CEO. Since Dr. Silverton did not diagnose Burton as being either a danger to self (DTS) or a danger to others (DTO), he was given clearance to resume his duties as CEO, pending additional and ongoing treatment.

TOXIC LEADERSHIP

But a dark cloud engulfed Bentley Pacific. Owing to the privileged status of Burton’s coaching and treatment by Dr. Silverton, the company returned to the status quo. Management was once again intimidated and confused by Burton, and publicly did its best to follow the CEO’s marching orders. The ultimatum from management was clear: employees would have to expand their work hours into evenings and weekends or risk receiving an updated version of the “Black Friday” e-mail. The only compensation promised was the slim prospect of holding on to a position in the midst of a bleak job market. It was a strategy of pure intimidation and negative reinforcement.

The organizational pain permeating Bentley Pacific was to a significant degree due to toxic leadership at the top. In extreme situations where mass downsizings may be justifiable, only a minority of leaders gradually and sensitively break the news to their employees (Cameron 1994; Cameron and Lavine 2006; Goldman 2007). Not only was Bentley Pacific leadership the bearer of dreadfully bad news, but because he was so sorely lacking in people skills or any semblance of social or emotional intelligence, the pain caused by the firings was even more devastating than it might have been (Goleman 1995, 2000). Under the toxic leadership of Cal Burton, the downsizing proceeded in a devious, secretive, and treacherous fashion, eliminating 198 employees and destroying any trust that remained among those who had been spared. Thoughts of retaliation loomed large among the wounded engineers and staff.

Meanwhile, Dr. Silverton continued to work in the trenches as CEO Burton’s coach and organizational therapist (see Schein 2005). Slow to detect that the CEO might require special attention in the form of leadership coaching, the consultants had made their referral fairly late—limiting the organization’s chances for damage control, healing, or transformation. By the time Dr. Silverton reached a diagnosis, little could be done to lighten the load of the downsizing or decrease the swell of grievances or lawsuits. And the ADA’s requirements of privileged communication surrounding DSM diagnoses limited both Dr. Silverton’s and Bentley Pacific’s options. The diagnosis could not legally be revealed to the company. Members of the Bentley Pacific board of directors and the head of human resources (HR) intuitively suspected that Burton had “gone postal,” but there was little they could do about it other than place their faith in Dr. Silverton. From a larger perspective, however, the explosive personality of Burton was reflected in the totalitarian strategy of the Bentley downsizing. Although the grievances and lawsuits were not anticipated, the ironclad leadership deemed necessary to effect a massive, overnight downsizing was in fact characteristic of Bentley Pacific’s management style. Burton delivered a harsh edict, perhaps too harsh even for Bentley’s extreme theory X (authoritarian) objectives (see glossary). Several of the Bentley old-school hard-liners whispered that perhaps Burton had gone too far.

FUNCTIONAL DOWNSIZING INC.: NORTH COUNTRY SOLUTIONS

In sharp contrast, the leaders of the nearby Vancouver, British Columbia–based engineering company and competitor, North Country Solutions, handled their downsizing in a radically different fashion. North Country’s CEO, Lane Blake, was deeply influenced by her direct knowledge of the heralded and highly successful downsizing at Rocky Flats Nuclear Plant in Denver, Colorado (see Cameron and Lavine 2006). Blake believed that the forward-thinking leaders of Rocky Flats had been instrumental in pointing the way for other organizations to minimize the organizational pain of a wide-scale termination. Lane Blake was committed to a systemwide cooperative and relationship-building approach to radical organizational transformation. A pivotal point in her “kinder, sweeter downsizing” was Ms. Blake’s decision to spend six months preparing her targeted professionals for the financial dilemma confronting North Country Solutions. In a series of face-to-face meetings with the engineers most likely to be released, Lane Blake and five members of her management team explained at length the possible employment ramifications of the “difficult North Country drama” that was unfolding.

Following the CEO’s vision, the management team operated as managerial counselors and internal coaches (see Whetten and Cameron 2007) and carefully addressed the affective and emotional dimensions of the tough times ahead. Blake and her associates spent many hours delving into the individual concerns and fears of each employee and preparing them for a career transition in the foreseeable future. Supportive communication, empathy, and resilience in the face of the downsizing preoccupied the managerial team (see Bright, Cameron, and Caza 2006; Fineman 1996; Frederickson 2003). Despite the ensuing cuts, leadership was determined to make it right with the engineers. The CEO-led team personalized the process and attempted to turn threats into opportunities and weaknesses into strengths (see Clifton and Harter 2003). Blake conceived of the imminent parting of ways as “but a hill or small mountain that a business family must climb as they face the challenges of growing up and apart.” Along these lines Blake decided to make transparent to her engineers the financial hardships driving the downsizing. Blake believed that making the targeted engineers privy to the hard data would be a step en route to facilitating trust and constructive dialogue (Burke 2002). In addition, the CEO was committed to preparing the exiting engineers for the outside world and professional life after North Country. Those being terminated were provided with extensive training and retraining options accompanied by one-on-one coaching to address networking, introductions to prospective employers, and job searches. Whenever possible, the downsized engineers were placed on a short list of employees to be potentially rehired as North Country outside contractors (without benefits).

The humane downsizing approach at North Country Solutions emerged from a culture of collaboration and empowerment, in contrast to the culture of avoidance and demagoguery at Bentley Pacific. The relationship-oriented leadership extended to a careful articulation with remaining North Country employees who feared for their jobs. CEO Blake and associates made it abundantly clear that the company was ready to stand by their remaining employees to the bitter end. They were assured that their jobs were safe as long as North Country was able to survive and fend off the growing threat of a hostile takeover by either Bentley Pacific or the Toronto conglomerate Maple Leaf Aeronautics. North Country guaranteed their continued employment for the life of the organization and also provided them with an incentive-based partnership whereby strong performance was linked to generous financial rewards (see Lawler 2000).

DEMAGOGUE TO DIALOGUE

On the surface, the leadership of both Bentley Pacific and North Country Solutions dealt with the unpleasant task of a companywide downsizing of high-level professionals. As revealed, however, CEOs Burton and Blake conceived of and approached their downsizings in dramatically different fashion. The North Country strategy of empowering and including both the exiting and the remaining engineers in a substantive dialogue softened the impending threat and made a typically top-down decision into a more humane and empowering affair. The functional relationship approach yielded a 93 percent placement rate for the terminated engineers into either new professional appointments or as independent contractors for North Country. Of 212 employees directly affected by the downsizing, only two filed grievances against North Country. The two disputes were eventually satisfactorily resolved through the collective and collaborative efforts of the human resources department, the in-house EAP, and an external consultant working with CEO Lane Blake.

In contrast, the Bentley Pacific downsizing was met with extensive in-house grievances and twenty-seven lawsuits vigorously pursued in the courts, resulting in a further corporate financial drain and deteriorating image management. According to one of the legal transcripts from a Bentley Pacific engineer,

The Bentley Pacific downsizing is a grave disappointment to me, and I speak as a dedicated eleven-year veteran of this company. But it is not the mass firing that brings me to the point of a grievance and determined legal action. It is the condescending, patronizing, and despicable manner in which I was terminated. The CEO and my immediate division head, Elton Blackwell, never did prepare me or warn me face-to-face. It was all secretive . . . an ambush . . . an act of sabotage against your own people. I’ve even heard that the CEO has some kind of psychiatric condition. How dysfunctional can you get? When you treat your engineers as expendable widgets you can expect some backlash. Engineers have some blood and pride flowing through their veins . . . at least I do, last time I checked.

The emotionally explosive, top-down handling of the Bentley Pacific downsizing escalated its negative impact and set the stage for deterioration and confrontation. Faced with resistance and a groundswell of conflict, a CEO with a dysfunctional past turned an already bad situation increasingly toxic.

Anger and physical disputes appeared to emanate from CEO Cal Burton consistent with his longstanding problems with an intermittent explosive disorder. Toxicity took a grip on the organizational culture when a series of verbal and physical altercations arose at Bentley Pacific. The disruptive downsizing morphed into widespread bullying, intimidation, and physically destructive acts. Overly trusting in the newly anointed CEO as a heroic leader and corporate savior, Bentley Pacific unwittingly set the stage for a demagogue. CEO Burton’s explosive outbursts agitated both his management team and a significant percentage of the engineers. The revelation of his darker side during the stressful downsizing resulted in widespread negative deviance among the employees.

In contrast, Lane Blake enjoyed considerable success with her approach to the North Country downsizing. Dr. Irene Daniels served as Blake’s confidant and leadership coach. Daniels prepared Blake for the streamlining by systematically examining approximately forty-five cases of western European, Canadian, and U.S. corporate downsizings, with special scrutiny on successes and failures. Best practices of analogous companies were identified (e.g., Rocky Flats Nuclear Plant), and various scenarios were discussed in the context of the North Country organizational culture. As a caveat, Blake was well schooled in a more theory Y, or participatory, approach to her workforce, a horizontal and empowerment approach that was compatible with companies benchmarked in her research with Daniels (see theory Y and theory X in the glossary). Of particular concern to Blake were the people skills required in breaking bad news and the importance of nurturing and maintaining a dialogue through the most troubling of times. Blake had already developed an emotionally intelligent, relationship-building approach to workplace conflict, but had to apply this to the specific objectives and potential pitfalls of a downsizing. The trials and tribulations of downsizings were aptly covered by Dr. Daniels, who brought direct knowledge of radical organizational transformation to her client. Via role playing, case studies, simulations, and scenarios, Daniels and Blake worked through a myriad of contingencies and approaches to the downsizing, conceiving of it as a complex, systemwide objective.

Blake was not hesitant to reveal her fears, doubts, and insecurities to Dr. Daniels. Although she had had many successes at North Country, there had also been some troublesome communication breakdowns with engineers and repeated minor conflicts and “brushfires.” In the words of Dr. Daniels, “there were a few blind spots that required illumination.” Even the carefully conceived and strategized North Country downsizing put both terminated and surviving employees on edge and made many fearful, angry, and confrontational. In coaching sessions Blake further revealed that she occasionally “felt driven by the numbers, manhandled by the executive board, and pushed against the wall to create fiscal miracles and show quarterly earnings far beyond what reality allotted.” When she felt pressure from above, Blake admitted that she could be impatient, hurried, frazzled, and abrupt in her decision-making. As she became increasingly aware of these tendencies through coaching, Blake worked with Dr. Daniels on maintaining a more balanced style of leadership, including an ability to focus on small wins and no longer succumbing to the mental and emotional state of being overwhelmed. As a leader, Blake was deeply influenced by what Dr. Daniels called the Rocky Flats–inspired “quest to make the impossible possible.” Blake wanted to take her ability to function as a successful leader t...