Friday 22 September 2017

Dearbhail McDonald: Goldilocks' three bears could teach us to fight off approaching Tigers

The dolce vita on the Amalfi coast — but the Celtic Tiger burst along with the Prosecco bubbles
The dolce vita on the Amalfi coast — but the Celtic Tiger burst along with the Prosecco bubbles
Dearbhail McDonald

Dearbhail McDonald

Everyone has a moment when they realised, or suspected, that the Celtic Tiger madness might not last. I had two such apparitions. The first was in the summer of 2006 sipping Prosecco on the terrace of a hotel perched on vertical cliffs overlooking the sea at Amalfi.

I was in Italy with friends who occasionally convene as a string quartet to play at the weddings of family and friends. I think I played at 13 Irish weddings that summer, at least three of which were overseas - I shudder when I hear the strains of Panis Angelicus now.

'One person who is concerned that we could slip back into ceo hubris is Professor Niamh Brennan'
'One person who is concerned that we could slip back into ceo hubris is Professor Niamh Brennan'

As we sipped our Prosecco and took in the awesome views, the girls and I wondered: Could this paradise last?

The second harbinger, a year later, was a more sobering one.

Agonising, as many did in 2007, over the crazy house-buying spree, a wise barrister who had earned his stripes in previous recessions told me to throw my head into the weekly High Court repossessions list before deciding if I wanted to join the stampede for €450,000 two-bed apartments.

Week after week I sat quietly at the back of that courtroom, nursing my angst about not getting on the property ladder. The numbers were initially small, but the level of mortgage defaults quietly building up in the system in the autumn of 2007 made me stop and think twice about scaling the property ladder.

I don't know about you, but of late it's beginning to feel a little bit like 2006 all over again - and I'm not sure I like it.

There's the "miraculous" recovery. There are people sleeping overnight in their cars to body-slam estate agents to secure deposits on as yet unbuilt apartments and homes, there's runaway house prices and waiting lists in Brown Thomas for certain luxury buys.

Don't get me wrong, it's great to see confidence return after the collapse in all but name of our banking system, a plain vanilla property bust aggravated by the now 10-year-old global financial crisis (GFC).

But is there such thing as too much confidence? When does over confidence become a strategic risk? And although we have an instinctive bias towards popular, confident types, are these the main traits we want to see in the leaders of our banks and businesses?

The 'confidence paradox' was the subject of a lively debate I chaired last week at the new Executive Development Centre at the UCD Smurfit School.

The new €5m centre, which has positioned itself as a key part of Ireland's offering to the multinational and indigenous sectors - and a key asset for FDI agencies in seeking inward investment - is shaping the next generation of Irish chief executives and leaders.

One person who is concerned that we could slip back into ceo hubris is Professor Niamh Brennan, Michael MacCormac Professor of Management and academic director of the Centre for Corporate Governance at UCD.

Brennan is the co-author of a fascinating academic paper which adapted the 14 clinical symptoms of hubris from clinical psychology to the analysis of narratives in a bank ceo's letters to shareholders in annual reports to reveal signs of ceo hubris.

Analysing the ceo letters to shareholders of a single bank over 10 years for evidence of personality traits, including narcissism, the results pointed to evidence of narcissism and hubris in the personality of the bank's boss.

The paper found that over half the sentences analysed were found to contain "narcissistic speak". In 45pc of narcissistic-speak sentences, there were three of more symptoms of hubris, otherwise known as extreme hubristic behaviour.

In relation to ceo overconfidence, only seven sentences (2 pc) contained bad news. More than half of the good news was attributed to the ceo and all the bad news was attributed externally.

"We were looking for symptoms of hubris, which we found, I can tell you, in spades," Brennan told a rapt audience at the stunning new executive development facility in Blackrock in Dublin.

Yes, once narcisstic ceo does not an entire hubristic culture make.

But for Brennan, boards need to be "very careful", when interviewing candidates, of the kind of personality traits that make it appear as if that person would be a good ceo.

Confidence, ego, the kind of things that in an interview might persuade a board to appoint a chief executive, said Brennan, are the kind of personality traits that may in fact fuel risks.

"An overconfident ceo is a big risk for a business," said Brennan, who said that things have changed in the wake of the GFC in terms of Irish corporate governance - but not necessarily in a good way. Selecting leaders generates any number of paradoxes, according to Karan Sonpar, a talent management guru and cognitive bias expert who once served as a captain in the Indian military.

"The very things that bring you up can bring you down," says Sonpar, Professor of organisational behaviour and academic director of MBA Programmes at UCD.

"Confidence is good, excessive confidence is bad. Humility is good. Excessive humility, not taking a chance, is bad.

"So paradoxes, and recognising paradoxes, make us uncomfortable.

"I would argue probably the most compelling framework of leadership is the incomplete leader, there is no one type of leader, there is no one person who has all the attributes."

So, it's a bit like Goldilocks and the Three Bears. Boards need to select chief executives that aren't too confident and not too humble - executives who take risks but get it just right.

Sunday Indo Business

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