Today Bank of America announced it will be cutting 30,000 jobs. This is due, in large part, to a problem with charismatic leadership in the organization. Not only has B.o.A. suffered from the result of over-charismatic leadership, it is now feeling the consequences of lack of charisma at the top levels.
During the 2008 US financial crisis, Bank of America was doing alright. A history of strong organizational structure and leadership had positioned it so that the brunt of the mortgage fallout missed it. But the then-CEO Ken Lewis decided - in an act of hubris that could be considered over-charismatic - decided to purchase Countrywide. This horrible decision led to organizational complexity and inefficiency, millions in bad loans, Lewis's departure, and eventually the drastic 30,000 person cut announced today.
Lewis's charisma had contributed to his ability to push through the Countrywide deal (and his desire to show Wall Street just how powerful B.o.A. could be). It was arguably the worst decision in the company's history.
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| Ken Lewis |
Now the bank is paying the price for a paucity of charisma at the top ranks. The current CEO, Brian Moynihan, is not showing enough charisma to convince investors that he is in control of the company. Stock prices are down 50%. This latest move can be seen in part as a way to send a signal to Wall Street that Moynihan will, in fact, be able to do what is necessary to turn the bank around.
But one wonders if the drastic cuts would have been needed if Moynihan had possessed enough charisma to be able to charm investors into confidence. On the other hand, perhaps the ability to charm investors is exactly what we want to avoid as we seek to get a clear picture of a company's financial situation. No one claims that Wall Street is rational, after all.
Charisma is one of the personal traits that is examined in the study of leadership. It appears when discussing the characteristics of transformational leaders. It has been suggested as a legitimate alternative to traditional power structures (there are those who lead because of their position, and others who are carried into power on the momentum of their charisma). Students see its influence in the Five Factor Model of Personality, where it influences surgency, dependability, agreeableness, adjustment, and intelligence. Charisma is even important in the follower, as it is in the followers' eyes that a leader is seen as charismatic.
As the Bank of America case shows, there are positives and negatives to the charismatic leader, and the trait is only one of many that all interact to determine leader effectiveness.
Join our students in the study of this and many other aspects of leadership in our Masters of Science in Leadership program. Contact us today to learn more.
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