With the Bernie Madoff being the latest in a series of massive financial frauds caused by leaders who misrepresented themselves, the time may have come to broaden the financial world’s definition of “transparency”. I’d like to offer a broader view to include publicly reported reports on leadership knowledge, skills, abilities, traits, values and interests. Would you have invested in Madoff’s Ponzie scheme if you had previously reviewed a report from a trusted authority on leadership assessment that noted he is low on conscientiousness and prudence? How would a board view this same report on a founder-CEO?
How well do you know your leaders?
Poor leadership is common, but leaders rarely fail in such a public way. In one study of nearly 400 Fortunte 1000 companies, 47% of executives and managers rated their company’s overall leadership as fair or poor; and only 8% rated it as excellent (Csoka, 1998). Personality traits predict both performance and ineffective leadership. For example, conscientiousness is one of the “Big 5” factors of normal personality that has been shown to consistently predict both job performance and dishonest behavior in the worklpace. Former professors of mine, Robert and Joyce Hogan have written extensively about this area, and have authored some of the better classical test theory instruments for normal personality, the “dark side” or disfunctional leadership, and leader motives, values and preferences. None of these sorts of assesments are typically used systematically to plan CEO development in private by the board. And it is entirely unheard of for these reports to be shared publicly with prospective customers, partners and shareholders. Perhaps we should reconsider making these transparent, systematically, given the risk and lack of confidence in markets of late? The free paper I drafted, “The Three Stooges of Operational Risk: Advances in Leadership Due Diligence and Rasch Measurement” proposes a way of improving our leadership assessments. If desired, they could be used for this transparency purpose. I welcome your feedback.
Special thanks to Alexei M for inspiring this idea.
Csoka, L. S. (1998). Bridging the Leadership Gap. New York: Conference Board.
Hogan, R., Curphy, G., & Hogan, J. (1994). What We Know About Leadership: Effectiveness & Personality. American Psychologist 49(6), 493-504.
Robie, C., Brown, D., & Bly, P. (2008, March). Relationship Between Major Personality Traits and Managerial Performance: Moderating Effects of Derailing Traits. International Journal of Management, 25(1), 131-139.