Narcissism appears to be on the rise among today’s business and entrepreneurial leaders, if you read the business pages and academic research on a regular basis. And this isn’t always a bad thing: Narcissists can be compelling leaders capable of executing grand strategic visions.
But all too often they are described as highly self-absorbed individuals who believe they are superior to those around them.
And while successful entrepreneurs tend to have high levels of self-confidence and an intense drive for success, often they’ll fall prey to the problems associated with the darker aspects of narcissism: Specifically, they take unnecessary risks, hold too tightly to their vision when change is needed and fail to recognise the work and sacrifices of those around them.
In our new study, which was published in May in Organizational Behavior and Human Decision Processes, my research partners and I sought to gain a better understanding of just how problematic narcissistic leaders are, and what they might do to lessen the negative outcomes. We surveyed 262 employees and their (262) direct supervising managers over a four-week period at a large Chinese technology company.
Overall, we found the harmful consequences of narcissistic leaders to be wide-ranging.
Just how harmful is a harmful narcissistic leader?
We began by asking leaders at the tech company we targeted to complete a widely used Narcissistic Personality Inventory test. Employees, meanwhile, were asked to report on their organisation-based self-esteem, meaning the degree to which they felt they belonged in their organisation.
As researchers we were operating on the understanding that the need to belong is a fundamental human need and motivator, but that narcissistic leaders fail to satisfy this need among their employees because of their high levels of self-concern.
Those high levels mean leaders like these ignore the feelings of others. Former Yahoo CEO Marissa Mayer, for example, was often described as highly self-absorbed and inconsiderate of others. She was often criticised for being habitually late to meetings and dismissive of her constituents’ ideas and suggestions.
Elon Musk, CEO of Tesla Motors and SpaceX, is also said to be highly abrasive, and to tend to berate employees who fail to live up to his impossibly high standards. One former engineer at the company referred to critical interactions with the SpaceX CEO as an “Elon ass-kicking” and said some employees felt “crushed under the weight” of those interactions. Not surprisingly, both Musk and Mayer have been recognised as some of the most narcissistic CEOs in the tech industry.
Our study found that 51 percent of employees with narcissistic leaders disagreed or strongly disagreed with statements asking if they felt valuable in the workplace. Moreover, this diminished sense of belonging had wide-ranging consequences on these employees’ behaviour. Specifically:
- 34 percent of employees surveyed disagreed or strongly disagreed with statements asking if they helped other group members with their responsibilities
- 31 percent of employees disagreed or strongly disagreed with statements asking if they spoke up to their leader about their own improvement-oriented suggestions
- 37 percent of employees agreed or strongly agreed with statements asking if they badmouthed their leader to their coworkers
- 18 percent of employees agreed or strongly agreed with statements asking if they intentionally tried to disrupt task completion by ignoring their leader’s requests.
Such behaviours are troublesome enough for established companies, but for start-ups – whose survival depends on quick action and cooperation from all employees – the consequences can be dire.
How can narcissistic leaders avoid the pitfalls of their personalities?
We asked employees to report whether their leader consulted with them before making decisions. While this kind of consultation is an influence tactic leaders use to gain employee support, it can also signal to employees that their contributions are valued.
We found that among narcissistic leaders, 27 percent frequently consulted with employees while another 43 percent consulted with employees to some extent.
Importantly, we found that when narcissistic leaders consulted with employees, the detrimental outcomes stemming from such leadership were not simply reduced, but eliminated completely. Here are three takeaways:
Active listening means that you concentrate on the message being communicated; you don’t just passively “receive” the message. Unfortunately, most narcissistic leaders have difficulty focusing on what others are saying and often ignore their advice.
One classic example of a narcissistic leader who altered his behavior to more attentively listen to others was Steve Jobs. Much of Jobs’ success upon returning to the helm at Apple in 1997 was attributed to the drastic change in his interpersonal behavior from his prior tenure in 1985.
Not only was he more willing to listen to his employees, but he was described as someone who “seemed to relish other people’s ideas.” Our research indicated that employees are likely to discount their narcissistic leaders’ more abrasive qualities when those leaders take the time to actively listen to their suggestions.
Don’t just listen. Invite employees’ involvement in the making and development of decisions. Our study demonstrated that when narcissistic leaders invite employees to participate in leadership processes, those employees experience a sense of ownership in the process that can help alleviate the leader’s more harmful tendencies.
In particular, such behaviour signals to employees that their narcissistic leader is not only willing to listen when they, the employees, have concerns or suggestions, but actually desire to receive those employee contributions.
According to Jack Welch, former CEO of General Electric, the best leaders “make a religion out of being accessible.” Likewise, our research emphasised the importance of narcissistic leaders making themselves accessible to individual employees.
Despite his narcissism, Welch often sent personal notes to his executives and met one-on-one with employees at all levels. Such behaviours were part of the programs Welch instituted to enhance employees’ “feelings of ownership and self-worth” in the GE culture. We found that the individual attention employees receive when they’re consulted provides the interpersonal interaction they crave, but rarely receive, from their narcissistic leader.
Due to the dynamic environment of the typical entrepreneurial venture, communication and cooperation from employees is a necessity for continued growth and survival. Although entrepreneurial leaders may be more narcissistic than their counterparts in non-entrepreneurial vocations, the pitfalls associated with their tendencies may be avoidable.
The key is for such leaders to understand how their narcissism is affecting others and actively work to adjust and adapt their behavioir.
This article was originally posted here on Entrepreneur.com.
What’s Your Number? How To Unpack Company Valuations
Business is booming. Investors want in. But how do you put a price on the value of the company you have built with your own hands?
Company valuations is such a hazy part of the scale-up journey of a private company. Putting a price tag on a business is both art and science. At the end of the day, the number that makes the headlines (if ever disclosed) will be where willing buyer and willing seller meet.
But how do you , as business owner, go about setting your asking price? Before approaching investors, it’s a good exercise to determine your own valuation range for the business. Choosing the right valuation method is the first big question. The answer has many parts to it, but the most important driver is the stage of the business.
Let’s look at some of the most commonly accepted valuation methods in our market:
Applicable stage: Established, profitable companies
Listed companies, institutional players and private equity investors normally invest in a company for its cash flow profit that can contribute to their portfolio income. More often than not, companies will be valued based on their current earnings (bottom line profit after tax).
This method can only be used for companies that consistently make a profit. A multiplier will be chosen based on the company’s perceived risk. Younger, more risky businesses will likely have lower multipliers (as low as 3 and 4) and high growth, well established, lower risk companies will get higher multipliers (8-15).
Sometimes small adjustments are made to current year earnings (like non-standard, non-repeating income statement items) after which the valuation is set at Earnings times multiplier equals company valuation.
Discounted Cash Flow (DCF)
Applicable stage: Post-revenue start-ups, growth companies and established businesses
The most commonly used method in practice, the DCF method argues that a company’s value is determined by the future cash flows that it will yield to investors.
The starting point is creating a five to ten year cash flow forecast for the business. This is no small feat. In order to create a full financial model – income statement, balance sheet and cash flow statement – for the next decade requires a lot of work, both from a strategic and technical perspective.
Investors love this model because if forces the owners to put a clear strategy and expansion plan for their business into numbers. It will include dozens if not hundreds of assumptions – all of which can be scrutinised for reasonability. The result of financial model will be five to ten years’ worth of projected cash flows. These amounts are then discounted to present value at a discount rate that reflects the company’s risk and expected cost of capital.
The sum of the discounted future cash flows plus a terminal value (that represents the value after the five or ten year period of the model) then represents the valuation of the company after some final small adjustments for things like existing debt in the business.
A revenue multiple valuation approach is focused on the market for similar businesses and is underpinned by your company’s current turnover. It seeks out the sales price of other similar companies in the country or worldwide, adjusted for size, stage and market differences.
A company that sold for R100 million at a turnover of R50 million would have a two times revenue multiple (valuation/revenue). If the average revenue multiple for similar companies is in a certain range, this multiple is then slightly adjusted and applied to your business.
If the average sale in your industry has been two times revenue but you are growing much faster than the average with a better competitive advantage, you can argue that two and a half times revenue is a more applicable number for your business. Revenue multiples are often used as a reasonability check in the market for the current asking price.
Most established companies are valued using one or a combination of more than one of the above three methods. At start-up stage, there are a number of other methods like Cost to Replicate or the Scorecard Method that early stage investors look to. When a company is simply in too early stage to practically value it, seed stage investors would also consider SAFE Agreements (Simple Agreement for Future Equity) – an instrument that determines that the percentage of the company the investors are buying with their investment. This is only determined when the Series A round is raised at a future date and under certain conditions, generally at a discount to the price the series A investors are paying.
Company valuations are complex. Many of the above technical factors play a role. A lot of it also comes down to the salesmanship of the owners and the negotiating capabilities of the parties. In ‘How Yoco Successfully Secured Capital And The Importance Of A Pitch’, the Yoco team speak about the importance of the right approach in their recent R248 million fundraising
Don’t go into this process without seeking some kind of expert advice. The price of the wrong valuation is simply too high. Make your numbers and your arguments bulletproof and you will be on your way to defending a strong and exciting valuation for your next raise!
3 Keys To A Vision Others Can Own
Trying to get others to buy into a vision that is all about you getting more money is not going to excite people.
I get really excited about my dreams. Over the years, as I have led my team, I have realised that they aren’t as excited about my dreams as I am. I own two restaurants and employ minimum wage employees. In the early years of owning my restaurants, turnover killed me. I used to fight for them to have the same passion for my goals and dreams as I had and as a result I had extremely high turnover. Confused and frustrated, I knew I needed to change the way I was leading a team.
A few little changes have created a committed team and extremely low turnover. If you don’t have a passionate, committed long-term team, check these simple vision casting strategies.
Often our vision that we cast is shallow and self-serving. A vision that is all about you getting more money is not going to excite people. Take some time to uncover what you are trying to accomplish. When you can cast a vision beyond your selfish desires, others can sink their teeth into the vision. For my company, I wanted to raise up leaders to change the community.
My focus changed to my crew and they could feel the shift in perspective, which also helped me to earn a bi-product of more money, my original desire.
Our deeper vision helps us keep and build a team, but it’s still our vision. We need to really understand the goals and dreams of our team to find untapped potential and loyalty. No one will ever care as much about our vision as us because it’s ours. The more focused you get about helping your team and their wants and desires, the more they will care about yours. In my restaurant I had a young lady who wanted to be a teacher. I thought about what it takes to be a great teacher and how I could help her toward that. Find out what they care about and dig deeper to see what is behind that desire.
Marry the Two
If you have a team running around caring only about their vision they may be loyal and passionate, however, they will not be united in one direction. Magic happens when we combine our vision and their vision. At the points of intersection, our interests and theirs are united to accomplish more. I want to encourage leaders who can change the community.
As for the employee I mentioned above who desired to be a teacher, I trained her toward being a better teacher so that she could raise up young leaders to change the community. Now she is one of my top supervisors and teaches many other crew members. She will be an awesome teacher someday, but in the meantime, she is a valuable team member.
Caring for a team and helping them see how your vision and their vision can help each other will change everything. Growing people is the business no matter what business we are in. Care for others and they will care for you. Care only for your own wants and you will never get the most out of your team. Find a deeper vision, figure out your teams’ vision, and combine the two and your business will transform.
This article was originally posted here on Entrepreneur.com.
3 Signs You Are Your Own Worst Business Enemy
It’s hard to be objective about ourselves but if we really pay attention our colleagues will reflect how we are perceived and what it means for the business.
Sometimes, it’s hard to get out of your own way.
Entrepreneurs and business owners have to keep all the trains running on time, as well as figure out the next place they’d like those trains to go, metaphorically speaking. It’s a huge, complex job. So it shouldn’t be a surprise to realise that in many cases, the problem behind an underperforming company is the boss.
How do you know when it really is “just you,” though? We human beings have a notoriously difficult time being objective about our own behaviour and choices.
So, try looking for the following signs in the people and circumstances around you.
1. Your employees seem unusually tense or flat lately
Has the camaraderie vanished? Is the workplace one big collection of really bad moods, most of the time?
Of course, the boss’s mood can infect the entire office. As the leader of your team, you set the example and the atmosphere, and your employees follow your lead.
Getting along with others, both inside and outside your company, is imperative for success. If your employees and customers sense a negative change, then it’s worth examining your behaviour. These signs could be symptoms that you’re becoming a toxic boss.
To address this, first make sure you’re acting with integrity and in accordance with your personal values. Next, make an effort to demonstrate empathy with your employees. You don’t have to agree with every single point they make to do this. Respect their boundaries and try to see the issue from their perspective.
Finally, make sure you listen deeply. Employers who simply command and demand compliance find themselves stuck with the “toxic” label all too quickly. Instead, be curious about your employees’ perspectives and problems. Ask open-ended questions to get them to tell you more, and listen to what they say.
2. You feel deeply frustrated with your employees
Are you feeling unusually impatient around new workers? Do you find yourself snapping at experienced workers over small annoyances or accidents?
If so, there could be some deeper issues at play.
Insisting on perfection, or even just on competence in an unreasonable amount of time can eventually sour your entire workforce and drive away valuable employees. You’ll have a hard time attracting and retaining talent if you create an awkward, uncomfortable or outright hostile environment.
Instead, try practicing a “talk-down” method on yourself. When you feel your impatience or annoyance growing, mentally talk yourself down from these emotions to a state of greater calm. Here are some questions to ask yourself:
- On a scale of one to 100, how bad is this, really?
- What’s the worst that can happen here, realistically speaking?
- If that happened, how would we respond?
- Is this more important than my relationship with my employees? Or my reputation?
In most cases, reflecting on these questions helps you keep small issues in check. You’ll also want to give some thought, however, to whether there’s a bigger issue just beneath the surface. Using smaller problems as a diversion from the bigger ones provides an effective distraction from tackling life’s larger challenges, but doesn’t do much to help us solve underlying issues.
3. Minor projects are infinitely refined and “perfected” but your company hasn’t come up with a strong new idea in ages
One of the most common ways entrepreneurs become their own worst enemies is by focusing too heavily on things that don’t deserve so much attention. For whatever reason – be it fear of failure, fear of success, or something else altogether – people fall into the habit of spending too much time perfecting existing projects when they should be thinking about what’s next.
Not giving yourself enough time to create and innovate is one of the biggest ways to become your own worst business enemy. Your primary job as the business owner is to create that overarching vision for your company, and then work with your team to figure out how to achieve that vision. If you’re not even allowing yourself the time to do so, you’re fighting an uphill battle without reinforcements. After all, no one else can really do this kind of work for you.
To combat this tendency, try keeping a log of your time for two weeks. Track your time in fifteen minute increments to help figure out where you’re spending the majority of your attention and energy. Then carve out uninterrupted “CEO time,” and schedule it as if it’s a firm appointment you cannot reschedule or miss. Give yourself at least three hours a week to work on new ideas for your company.
It’s hard to be objective about our own behaviour and surroundings. Instead, use your colleagues, employees, and environment as a mirror to reflect back to you the reality of how you are perceived and the ways that perception is impacting your business. Then take the appropriate action to mitigate those challenges.
This article was originally posted here on Entrepreneur.com.
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