Charismatic leadership has the power to inspire extraordinary accomplishments but also carries significant risks. Leaders with magnetic personalities and bold visions can attract devoted followings and fuel revolutionary changes. However, if not guided properly, a charismatic leader's traits have the potential to evolve into hubris, poor decision making, and unstable governance. As companies expand globally and must navigate ever more complex environments, strong organizational foundations and succession planning become vital complements to founding visions.
Today we will explore the research on charismatic leadership and apply it to understanding when a charismatic CEO acts as an asset to drive positive change, versus becoming a liability that can undermine an organization.
Defining Charismatic Leadership
Before delving into specific cases, it is important to define charismatic leadership as it relates to CEOs. Research identifies several key traits of charismatic leaders:
Confidence and conviction: They exude self-assurance in their vision and ability to achieve ambitious goals. This inspires follower commitment.
Charming personality: They charm and move people through verbal skills, enthusiasm, and personality rather than formal authority alone.
Focus on higher purpose: They articulate an inspiring vision and ideals that go beyond short-term tasks, focusing on higher purpose and principles to rally support.
Unconventional behavior: They may disregard rules or norms seen as obstacles and "shatter the status quo." This makes them agents of change but also unpredictable.
High expectations of followers: They set very high performance expectations and standards that motivate extra effort from followers seeking to meet the leader's demands.
If channeled properly, these traits can energize an organization. However, when taken to an extreme they may cross over into narcissism, deter checks on power, and jeopardize prudent decision-making.
Elon Musk: Visionary Asset or Eccentric Liability?
Tesla CEO Elon Musk exemplifies both the potential and risks of charismatic leadership. His vision and confidence in electric vehicles helped transform a niche industry. However, his erratic tweets have also landed Tesla in regulatory trouble and opened questions about his judgment.
Initially, Musk's force of will helped Tesla survive the 2008 financial crisis against all odds. His charisma, focus on a green future, and demand for excellence inspired loyal followers working "all nighters" to achieve production milestones. This drove Tesla's success in transforming the automotive industry.
However, Musk's unconventional approach also courts controversy. Regulators filed complaints against Tesla over Musk's 2018 tweets about plans to take the company private, alleging securities fraud for misleading investors. His mercurial behavior on Twitter raises governance concerns by directly challenging short-sellers, regulators, and other critics without board oversight.
While Musk's vision remains an asset, Tesla must strengthen checks to ensure his bold, rule-breaking leadership style does not veer into recklessness or abuse of power that damage the company's reputation or finance over the long-run. Done right, charisma and vision can be effectively channeled; but left unchecked, they risk undermining even the most transformative of leaders.
Building on Initial Success
Charismatic founders often launch disruptive organizations through sheer force of will. However, their leadership style may not scale effectively as the company grows to massive size. A balanced perspective is needed on when and how to build on initial success without over-relying on any single leader.
Steve Jobs and the Transition at Apple
Steve Jobs was a legendary charismatic leader who co-founded Apple in his garage and led the company to dominate personal computing with the Macintosh before being ousted in 1985. When he returned as interim CEO in 1997, Jobs again transformed Apple through visionary products like the iPod, iPhone, and iPad that established it as a leader in consumer technology.
However, Jobs' high standards and mercurial management style that drove innovation could alienate some executives and proved unsustainable for Apple's growing scale. After Jobs' tragic death in 2011, the company faced risks without a clear succession plan.
Fortunately, Apple had gained a strong organization and processes thanks to Jobs' earlier efforts to build a leadership team beyond himself. His successor, Tim Cook, prioritized maturing Apple's operations while still championing Jobs' vision. This stability allowed Apple to build on its momentum, without excessive dependence on any single charismatic figure.
The lesson is that while charismatic founders may spark revolution, governance must evolve to distribute leadership as dependence on the founder declines. Succession planning and sharing power prepares companies to leverage initial vision over the long run. When done right, as at Apple, this builds an enduring organization far beyond what any single person could achieve alone.
Maintaining Vision While Distributing Ownership
Some companies distribute ownership effectively while still retaining the vision and passion of their charismatic founder. Starbucks is an example of shared leadership maintaining transformative momentum.
Howard Schultz and Shared Stewardship at Starbucks
When Howard Schultz joined Starbucks in 1982, he borrowed the idea of Italian espresso bars to transform the small Seattle coffee chain into a global brand. As CEO from 1986 to 2000 and again from 2008 to 2017, Schultz's charisma, passion for coffee culture, and people-first philosophy grew Starbucks into the world's largest coffeehouse chain.
However, through two CEO successions, Starbucks avoided over-reliance on Schultz by thoughtfully distributing leadership. In 2000, Schultz stepped aside to chair the board, mentoring new CEO Orin Smith through the transition. And when he returned as CEO, Schultz again planned an orderly succession, developing Kevin Johnson as the next leader to steward Starbucks’ inclusive values.
Today, Schultz remains chairman emeritus sharing ownership through his ongoing commitment to ethical sourcing initiatives. Meanwhile, Johnson has championed inclusion, maintained a people-first culture, and accelerated digital growth. The result is Starbucks retains Schultz’s transformative vision through shared stewardship that builds on - rather than depends singularly upon - its original charismatic founder.
Charismatic leaders can inspire great visions, but the most enduring organizations thoughtfully distribute ownership and responsibilities over time and successors. This allows their spirit to live on through others’ able leadership as companies mature at massive scale. Starbucks provides a model for how this is successfully achieved.
Focusing Passion While Encouraging Prudence
Charismatic leaders often upend sectors by breaking conventions, yet later guiding maturity requires prudent risk management too. Governance ensures passion does not override safety or long-term thinking as industries consolidate.
Herb Kelleher and the Legacy of Southwest Airlines
Through charm, quirkiness and cost-cutting unconventionally, Herb Kelleher co-founded Southwest Airlines in 1967 turning the airline industry "upside down" with low-cost flights. As legendary CEO through 2001, Kelleher's charisma helped transform Southwest into the most profitable major U.S. airline through booms and busts.
However, later industry consolidation also brought risks. After 9/11, some pushed for rash expansion threatening Southwest’s low-cost model. But Gary Kelly, Kelleher's successor as CEO, maintained discipline and financial strength through recession by focusing intensifying competition.
Today, Southwest remains consistently profitable through Kelly ensuring prudent growth complements its founding low-cost DNA. The company avoids over-expansion that could undermine stability. While Southwest retains Kelleher's maverick spirit through 50 years, governance now fosters safety alongside passion as industries change dramatically.
Charismatic pioneers break norms, yet later leaders must balance risk, costs and competition sustainably. Governance plays a vital role focusing founding visions prudently as sectors evolve enormously from their disruptive origins.
Conclusion
Charismatic CEO leadership can dramatically transform organizations through bold visions and motivating followers. However, governance must effectively channel such leadership to avoid potential downsides like recklessness, succession issues, or dependency on a single individual that threatens long-term success.
The cases explored show charisma succeeds best when: vision inspires others to build an organizational foundation beyond any single person; leadership responsibility is thoughtfully distributed over time; prudent risk management complements passionate disruption as companies mature enormously in scale and complexity; and successors skillfully steward the founding spirit to new heights in ever-changing environments.
Overall, charismatic CEOs offer enormous potential value as visionary change agents when paired with strong governance facilitating responsible growth well beyond the founders. Applying these lessons equips boards and executives to identify not just opportunities, but also risks in charismatic leadership — steering an optimal course between asset and liability for sustainable organizational success.
References
Conger, J. A., & Kanungo, R. N. (1987). Toward a behavioral theory of charismatic leadership in organizational settings. Academy of Management Review, 12(4), 637–647. https://doi.org/10.5465/amr.1987.4306715
Collins, J., & Porras, J. I. (2002). Built to last: Successful habits of visionary companies. Harper Business Essentials.
Wexler, M. N. (2018). The social theory of W. E. B. Du Bois. Routledge.
Jonathan H. Westover, PhD is Chief Academic & Learning Officer (HCI Academy); Chair/Professor, Organizational Leadership (UVU); OD Consultant (Human Capital Innovations). Read Jonathan Westover's executive profile here.
