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Study: How paranoia keeps bosses from working well together – and how they can overcome it

August 4, 2017

For more information, contact: Ben Haimowitz, (718) 398-7642, press@aom.org

When bosses are asked to work with other bosses, what is likely to be the result? All too often it proves unsatisfactory. Management scholars still recall the two tumultuous years when Sandy Weill and John Reed agreed to serve as co-CEOs of Citigroup, newly merged from their respective companies, before Reed finally departed the arrangement. And the problems that plagued that relationship were hardly unique. As a new study notes at the outset, "Research on management teams has shown that, when high-ranking executives work together, turnover and worsened organizational performance often result."

The new research then proceeds to ask why. And in a series of experiments it uncovers a familiar phenomenon lurking in the middle of the problem: Paranoia.

In the words of the study being presented at the annual meeting of the Academy of Management (Atlanta, Aug. 4-8), "Power struggles in high-power groups stem from paranoid cognitions that arise when high-power individuals interact...This is likely to occur in high-power groups due to the fact that all members have power to lose and are all potentially seeking out means to protect and expand their power base...[and] may suspect that their peers will directly challenge their own high-power position...Thus, individuals within high-power groups are more likely [than those in lower-power groups] to launch preemptive strikes in the form of power struggles generated by paranoia."

Explains Emma Y. Zhao of Carnegie Mellon University, who carried out the research with Lindred L. Greer of Stanford University, "The nature of the problem we are addressing here needs to be distinguished, of course, from the clinical paranoia that psychiatrists commonly treat with medication and therapy. The sub-clinical variety commonly encountered in organizations might be defined as simply a tendency toward excessive or irrational suspicion of others. What surprised us in the experiments we describe in this paper is how readily people slip into paranoiac ways of thinking in high-power groups."

The professor adds: "Our research has also suggested a common-sense cure for this cognitive tendency – namely, maintaining an external focus. This means having the discipline to focus not on other members of the group but on the nature of the issue at hand and how it relates to a broader environment."

The study's findings derive from a series of behavioral experiments designed to test for power struggles and paranoia in high-power groups and to probe a possible way to overcome them – this last aspect of the research being bolstered by analysis of actual data from the corporate world.

■ In the first experiment 226 individuals from a university were divided randomly into two-person teams, which were evenly divided between high power and low power. Participants in the former teams were told that they and their teammate were marketing managers with a lot of power in their firm, while participants in the latter groups were informed that they were less-than-powerful marketing consultants. In addition, reminders of participants' status were provided by such room props as fancy chairs with nameplates for the managers and small wooden chairs with hand-written name tags for the consultants.

Groups were assigned to develop responsibilities and logistics for an upcoming project, in pursuit of which participants were confidentially advised to take different positions on various points to be negotiated with their teammates. The degree of power struggle in groups was determined through the extent of participants' agreement with such statements as "I struggled for power through this negotiation" and "We tried to dominate each other during the task," and teams were rated on their negotiating outcomes.

High-power duos were found to be significantly more likely to engage in power struggles, which predicted their lower success in negotiating with each other.

■ In a second experiment, 103 participants enlisted through a crowd-sourcing Internet service were informed that they were members of three-person groups (actually, the two other persons did not exist) that would be asked to provide ideas on improving crowd-sourcing. More to the point, subjects were informed that they and their two teammates were either all high-power or low-power persons, with descriptions indicating that “individuals with HIGH power will have control over the interaction with their group members,” while “individuals of LOW power will only be asked to follow directions.”

Participants were asked to respond to statements to gauge, 1) their level of paranoia (for example, “I am suspicious of my partners’ intentions”) and 2) their anticipation of power struggles. Subjects in the high-power groups revealed significantly more paranoia and greater anticipation of power struggle than those in the low-power groups. In addition, they performed more poorly on a brief test of verbal reasoning, suggesting that their higher levels of paranoia and greater anticipations of power struggles were quite real and were affecting mental acuity.

“Together with Study 1,” the professors write, “the two studies show that high-power collaborations stimulate power struggles, and that this can be explained by the presence of paranoia in high-power individuals.”

■ In a third experiment, the professors tested a possible solution to the problems the first two studies had revealed – namely, whether directing the attention of high-power groups to external issues rather than to fellow group members would mitigate paranoia and the power struggles and subpar performance it augured.

One hundred ninety-five participants from a university were asked to brainstorm ideas, which would supposedly be shared with the president, on how to make best use of $10 million to improve on-campus housing. Again the sample was divided into high-power and low-power groups, with participants again told they had two partners (who were again bogus). Half the subjects were asked to focus their attention internally – on what their group-mates’ ideas might be and how much control those teammates might want over the decision-making process; in contrast, the remaining half were asked to focus on how the project might impact the surrounding community.

As the professors suspected it would be, paranoia was significantly greater in the high-power group that was internally focused than in the one that was externally focused, while significantly exceeding any paranoia in the two low-power groups as well.

■ To probe what difference external focus might make in the corporate world, Profs. Zhao and Greer assembled data from the largest 120 companies of the Fortune 500, focusing particularly on gross profits in the five years 2010-14 following the Great Recession. External focus was assessed by textual analysis of company letters to shareholders, an approach commonly used in management research. Specifically, the professors counted the number of words related to the stem words “competitors,” “strategic partners,” “creditors,” and “suppliers,” and divided this sum by the total number of words in the letters. Controlling for an array of factors that can affect financial performance, they found higher proportions to be correlated with superior financial performance, a result that in combination with the previous experiment, leads them to conclude that “attentional focus is an important lever to prevent the problems inherent in high-power groups.”

How, then, to get real-world bosses to use that lever? Prof. Zhao concedes that may not be easy. “Just following the news out of Washington every day suggests how difficult it is,” she says. “And our experiments showed how readily ordinary people who are simply role-playing slip into paranoia.

“Hopefully, experience will impress on seasoned executives the need for external focus,” she adds. “But, if the discipline to maintain that focus is lacking, facilitators should be brought in. The need to get high-power people to work together fruitfully may very well be more important today than it has ever been. Just think how often we hear organizations criticized because they’re dominated by silo mentalities. Changing that means getting the people at the top to learn how to work together.”

The study, “Performance Failures at the Top: An Examination of Paranoia and Power Struggles in High-Power Groups,” will be among thousands of research reports presented at the 2,150 sessions of the Academy of Management annual meeting in Atlanta from August 4th through 8th. Founded in 1936, the Academy of Management is the largest organization in the world devoted to management research and teaching. It has about 20,000 members in 128 countries. This year's annual meeting will draw some 12,000 scholars and practitioners for sessions on a host of subjects relating to business strategy, organizational behavior, corporate governance, entrepreneurship, careers, human resources, technology development, and other management-related topics.

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