In the final week of our seven-part thought leadership series on the Seven Tough Truths of Effective Leadership, we will examine how leaders navigate power dynamics and corruption.
“Power tends to corrupt; absolute power corrupts absolutely”. This famous quote from the historian Lord Acton encapsulates the seventh painful paradox leaders must resolve. By understanding why leaders acquire power, how they leverage their power, and when power can lead to moral and legal corruption, leaders can more consciously and conscientiously apply it and avoid the trappings of power.
To understand how power leads to corruption, it is important to understand why and how leaders acquire power. In short, the more power they have the easier it is to function as a leader and get results. Leaders can only do what they can with the resources available to them, so they are constrained at points in time – notwithstanding future investment they tend to have a fixed amount of money, people, and other assets. They are also constrained by laws and regulations which shape how these resources are allowed to be used, by whom they can be used, or where and when they can be used – people cannot legally be made to work ridiculous hours, factories are limited in the pollutants and emissions they produce, and so on. The difference between the constraints on resources and the constraints of laws is that laws can be broken.
In most cases, there is an established risk and cost for breaking laws and regulations. If the cost of breaking the law is life in prison and a leader is 100% certain they will be arrested immediately without any enjoyment of the benefits, then it is likely they will never break the law. However, this is generally not the world we live in, and there is always a chance a leader might never be caught and if they are they may enjoy their ill-gotten gains before or after their arrest, and the penalty is rarely life in prison. This means the limits of the laws are less finite than the limits of resources. This is one of the reason some leaders break the law and violate regulations.
What is interesting is the chances of being caught has greater influence on the choice to break the law than does the negative consequences. According to research from the National Institute of Justice in America “The chance of being caught is a vastly more effective deterrent than even draconian punishment.” and “Scientists have found no evidence for the chastening effect.” So, expecting people to follow the law because of punishment is not effective at all, yet deterring them because they will certainly get caught is. In a world full of poor precedents, loopholes, creative accounting, token fines, and massive egos there are plenty of reasons for leaders to believe they may not get caught or suffer any material loss. This is a key reason why deterring people from taking actions is less effective than compelling them not to take certain actions in the first place.
This is where the leader encounters another form of power – the power to break the law. If breaking the law makes the company a million dollars and the fine is only $10,000 with no reputational damage, then it is a risk potentially worth taking. The perception of which risks are worth taking depends in no small part on the leader’s personality, morality, and motivations. As Abraham Lincoln said, “Nearly all men can stand adversity, but if you want to test a man’s character, give him power.” Leaders by their nature encounter and acquire power, but it’s how they choose to use it that truly matters. Most organizations are selecting and assessing their leaders based on their technical, commercial, and interpersonal skills – things central to ability to acquire power, but rarely are they testing the leader’s innate levels of morality and motivation which indicates how they will use their power.
Leaders also have the power to make decisions, which often impact people. How someone makes decisions that impact others has been studied extensively in psychology. One of the most famous experiments was the Milgram electric shock experiments, where a person in a position of perceived power, the experimenter, told the participant to give an electric shock to another person. There was no real electric shock, the other person was an actor pretending to be shocked, but that was unknown to the participant.
What was both interesting and terrifying about the experiment was how this power was applied - participants would give increasing levels of electric shocks for the most trivial of things, simply because they were instructed to - so much so that if the electric shocks were real the actor would have been killed. This demonstrated how compliant people were to a leader telling them what to do and highlights the enormous power a leader has to influence others.
Whether it is about the leader choosing options or influencing others to make choices, there are two strategies that affect the way others act – compellence and deterrence, which is different from positive and negative reinforcement. Deterrence is something that is done to stop someone from doing a specific thing – putting up guardrails and constraints so people comply because of a gain or loss that will occur. Compellence is about influencing people to choose one option over another – it is early in the decision tree whereas deterrence is at the end.
A simple example is the strategies governments use to stop people speeding on the roads. A deterrent strategy is road patrols, cameras, and fines to stop people from speeding. A compellent strategy is graphic advertising focused on the pain and suffering caused by high-speed traffic accidents. Because people don’t believe they will always be caught, the deterrence is less effective than the compellence.
In business, organizations often look to apply deterrents to ensure leaders treat people well – implementing anti-bullying policies and consequences. This can be largely ineffective because many leaders don’t believe they will be caught or suffer material consequences, and it is difficult to prove. Compellent strategies would be early and frequent interventions that ‘humanize’ people by encouraging less time at work and more time with family, hosting company events where family members attend, and encouraging executives to use language like ‘people’, ‘teams’, and ‘leaders’ rather than ‘staff’, ‘juniors’, and ‘bosses’. Over time, these strategies encourage leaders to see people as people rather than machinery that can be used and abused to perform a function.
When a leader is seeking to deter or compel someone to make a decision or take action they often introduce or infer secondary gains or losses that are outside the scope of the primary decision – these are commonly known as leverage, carrots, or sticks. As an example, if the choice is choosing a major supplier then the primary decision involves information regarding their company, their track record, and how this may affect you and the team. However, if you choose one supplier you will receive an overseas trip or a rebate in cash, then this secondary gain will impact the decision-making process but is not inherently part of the primary decision. This is where secrecy, intimidation, bribery, moral and legal corruption can creep in. Leaders can escalate how they compel or deter people and apply their power:
- Influence and persuasion: no secondary gain or loss to the other party. The other person makes the decision, but the leader provides some biased information to get their way.
- Undue influence: some secondary gain or loss to the other party. They chose to change their decision to achieve the gain or avoid the loss based on some biased information from the leader.
- Coercion: significant secondary gain or loss to the other party. The leader amplifies the gain or loss, and the other party is driven to choose the primary decision the leader wants to achieve the significant gain or avoid the significant loss.
- Manipulation: significant secondary gain or loss to the other party. They think they are making the decision based on their own information however they’ve been convinced they want something they don’t. While the information is factual, the leader biases the information and decision towards the wrong choice.
- Disinformation (lying / providing ‘alternative facts’): significant secondary gain or loss to the other party. They think they are deciding based on their own information, however it has been curated by the leader so certain decisions will be made due to false information.
So why do most leaders want to acquire power? The leader with more options can introduce more secondary gains or losses when driving action. The leader who cannot change the amount a person is paid, where they work, or their bonus payment has fewer options. If business success is the leader’s responsibility, then it makes sense to strive to be the leader with more options and power. This layer of power requires the leader to accumulate more power, not for its own sake, but to be able to have greater success in more situations.
Finally, it is not the power itself that is the issue, but how the leader chooses to wield that power. It is how the leader applies the secondary gain or loss to move individuals and teams that can be seen as ‘good’ or ‘corrupt’. It’s a bit like splitting the atom – whether you use the energy to power millions of homes, or to unleash nuclear destruction the primary decision is the same, but the secondary gain or loss is very different. The same is true for leadership, the key determinant around the abuse of power and perceived corruption is how the leader leverages the secondary outcome.
When a leader has accumulated power and has lots of options, there is rarely randomness to their choice in how they influence people – they are guided by their values and virtues. A ‘good’ leader uses the secondary elements differently to the corrupt leader, which makes little rational sense when you consider that ‘good’ can only do what ‘good’ can do – it is constrained by morality, while evil can do everything ‘good’ can do plus more. Evil is holding more cards – it has more options. However, the wild card is that ‘good’ builds trust in long-term relationships, which removes friction and other costs of doing business, saving time, money, and resources which ultimately creates more options for the leader over time.
There are situations where corruption is blended with pseudo altruism. Take for instance the idea of people feeling like they have a job that serves a good purpose. This itself is not actually the primary issue at hand - it is a secondary gain, as there are many jobs that have totally different primary tasks that could have the secondary gain of feeling like you’re doing good. Many institutions tap into this, paying professions like nursing and teaching substantially less than other jobs by exploiting the secondary gain of “doing good for the community”.
This is where the line between power and corrupt practice becomes very subtle and even subjective. While the secondary gain is positive in the nurse and teacher example, it is drawn from the power of leaders and potentially corrupting the leaders – making them a party to paying low wages relative to the difficulty and importance of the job to the community, simply because they can. The ‘moral’ and ‘fair’ decision might be to pay teachers and nurses more, but there are people willing to do good jobs for bad pay, there is only so much money to go around, hence the paradox comes full circle to a potentially ‘vicious circle’ around the issue of limited resources a leader must manage
This is why it is essential for leaders and organizations to plan and predict where power has the potential to corrupt and then identify leaders who can make tough decisions while operating with high levels of morality, fairness, and sincerity. In an increasingly volatile, uncertain, and complex business landscape people are being increasingly impacted and impaired by four primary psychological risk factors - anxiety, stimulation, conformity, and ambiguity (ASCA). These risk factors are not part of the primary jobs or tasks people are expected to do and are not part of the primary decisions leaders need to make every day, yet they are an unrecognized secondary gain or loss with major material impact on people and performance.
While these psychological risk factors have historically been seen as an immaterial ‘cost of doing business’, the material cost of psychosocial risk to organizations is rising at an exponential rate. The new global ISO 45003 guidelines for managing psychological health in the workplace is being tested in legal courts and the court of public opinion. As such, enlightened leaders and organizations need to be aware of these factors when wielding their power by making decisions and compelling people.
When someone assumes the role of a leader it is critical to have better personal insight – knowing where they may be susceptible to temptation when they have unlimited options. Leaders can’t be driven purely by external forces and blindly constrained by their habitual impulses. They must have strong insight into their internal psychological constraints and understand their ‘why’ – why they do what they do, and don’t do what they don’t do. This is the key to resolving the paradox of power.
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