Power can go to the heads of business leaders says study

A LITTLE power really can be a dangerous thing, according to new research which claims it can lead to over-confidence and risky decision making among business leaders.

It said powerful people may become less able to correctly assess risk – and need people around them who are willing to tell the truth.

Researchers believe the syndrome may contribute to corporate disasters, such as the over expansion of the Royal Bank of Scotland under the chairmanship of Fred Goodwin or the assertion by BP, led by Tony Heyward, that a oil spill into the Gulf of Mexico was “virtually impossible”.

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Professor Nrio Sivanthan, of the London Business School, and Professor Nathanael Fast, of the University of Southern California. said their research, published in the journal Organisational Behaviour and Human Decision Processes, shows how easy it is for people in power to incorrectly believe they are infallible.

The researchers split a group of volunteers into two and conducted a faked aptitude test.

Half the volunteers were told the tests revealed them to be powerful individuals able to control others more easily, while the others supposedly lacked this.

Ahead of being given a series of factual questions to answer, all the volunteers were asked to bet from their money on how well they thought they would do.

Those who had been told how powerful they were, bet the most and subsequently lost the most too when their answers turned out to be wrong. The others were more cautious with their betting and so ended up with more money.

Prof Fast said it demonstrated how power makes people take much more risky decisions because of their over-confidence in being right all the time.

He said: “The aim of this research was to help power holders become conscious of one of the pitfalls leaders often fall prey to.

“The overall sense of control that comes with power tends to make people feel over-confident in their ability to make good decisions.

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“What we found across the studies is that power leads to overprecision, which is the tendency to overestimate the accuracy of personal knowledge.”

The tests also suggest that those with power are less likely to make bad decisions when they know their own limits.

And the best business bosses often have teams around them who are not just there to feed their ego but also to bring them down to earth, he said.

He added: “The most effective leaders bring people around them who critique them.

“As a power holder, the smartest thing you might ever do is bring people together who will inspect your thinking and aren’t afraid to challenge your ideas.”

Unfortunately, as some power-hungry bosses get to the top, they are less likely to feel they need this kind of help.

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