When Charismatic CEOs Are an Asset — and When They’re a Liability

by Nitin Nohria

In my role as a professor of leadership at Harvard Business School, I often taught a case exploring how Jack Welch led General Electric during the 1980s and 1990s — and on nearly a dozen occasions in the 1990s and early 2000s, he attended and participated in the discussion.

During the first part of each class, students would drive the case discussion as Welch listened intently. Then I’d ask Welch to offer his thoughts and reactions. When he’d rise and begin speaking, I tended to keep my eyes on the students. Most were spellbound. Welch exuded an energy and intensity that’s hard to capture in words. His verbal sparring with students was blunt, argumentative, and electric. The day after he attended this class, we would ask students for their impressions of him. The word that came up most often was “charismatic.”

Though celebrated for much of his life, Welch, who died in 2020, left a complicated legacy. He was credited for sparking new life and a period of unprecedented growth into an iconic American company — but he also been criticized for being excessively tough on people, too driven, and imprudently expansive in entering sectors like financial services, media, and entertainment that were too far afield from GE’s core competencies, leaving GE in a position that created thorny challenges for his successors.

There is no debate, however, about the fact he was a charismatic chief executive during an era when that quality became highly valued.

The prominent sociologist Max Weber was the first (in the 1910s) to talk about the role of charisma in leadership, viewing it as “a certain quality of an individual personality, by virtue of which he (sic) is set apart from ordinary men and treated as endowed with supernatural, superhuman, or at least specifically exceptional powers or qualities.” Charismatic leaders, in this view, can be a powerful force for social change.

But charisma can cut both ways. My colleague Rakesh Khurana captured some of the downsides of this style in “The Curse of the Superstar CEO,” a 2002 Harvard Business Review article describing research he’d done on how boards choose chief executives.

Before 1980, Khurana wrote, the average CEO tended to be an anonymous executive who climbed the ladder at a single company — someone no better known than the local dentist. During the 1980s, however, the news media began covering a cohort of charismatic, headline-seeking, big-personality corporate leaders the way the sports pages lionize athletes. Welch, along with leaders such as Chrysler’s Lee Iacocca, Disney’s Michael Eisner, Scandinavian Airlines’s Jan Carlzon, and Sony’s Akio Morita, became bona fide celebrities. Over time, boards became fixated on choosing telegenic, inspirational personalities to run their companies (and dramatically increasing these leaders’ compensation packages to keep them in the seat). The results, Khurana argued, often didn’t live up to the promise — partly because corporate success is a function of many factors beyond the CEO’s personality.

Like many people who were impressed by Khurana’s work, which he expanded in the 2004 book Searching for a Corporate Savior, I internalized his conclusions about the costs and benefits of charismatic CEOs. As much as I admired the way some leaders used personal magnetism to energize employees and influence stakeholders, I also tended to view skeptically business leaders who seemed too fond of the public spotlight. Research and my own experience suggest that organizations fare better when led by humble executives who sublimate their egos to focus on their team — who lead more from competence than charisma.

But as I watch a new generation of charismatic entrepreneurs and executives lead today’s companies, my views on the value of charismatic leadership have become more contingent.

Specifically, I have begun to recognize two contexts in which a leader’s reliance on the power of personality can be beneficial.

The first context is in entrepreneurial startups. When launching a new venture, everyone involved — investors, employees, customers, suppliers — is dealing with enormous uncertainties. Will the product work? Will it catch on? Can the company scale? Why won’t competitors overtake it? Behind the slide decks and optimistic projections, startups are fluid, risky, shapeshifting works-in-progress.

In organizations facing so much that’s unknowable, it’s natural for people to seek reassurance in a leader with a certain force of personality. In startups, the leader’s charisma gives people the faith to accept risks that would make reasonable people anxious. It is no coincidence that charisma as a leadership quality that inspires faith derives partly from theology; the Christian apostle Paul wrote about it in his New Testament letters. The same way countries seem to benefit from a certain kind of charismatic political leadership during periods of deep uncertainty — think of Churchill, for instance — nascent companies appear to benefit from them, too.

Consider Steve Jobs. He was egotistical and routinely flouted rules. (He drove cars without license plates because he disliked the way they looked.) At the same time, Jobs had an unrivaled ability to create what some called a reality distortion field, which one early employee described this way: “a confounding melange of a charismatic rhetorical style, an indomitable will, and an eagerness to bend any fact to fit the purpose at hand. If one line of argument failed to persuade, he would deftly switch to another. Sometimes, he would throw you off balance by suddenly adopting your position as his own, without acknowledging that he ever thought differently.”

Today many observers recall Jobs’s distinctive style — brashness, a tendency to provoke, and the ability to inspire a cult-like following — as a virtue, not a vice. Despite his arrogance and tendency to showboat, he successfully created products that have changed our world. It’s a relevant data point in the argument over whether the benefits of charisma may outweigh its costs. Although society has witnessed the damage that can be done by charismatic entrepreneurs such as Elizabeth Holmes, Adam Neumann, and Sam Bankman-Fried, we’ve likewise benefited from the creative vision — despite some legitimate criticisms — of founders such as Jeff Bezos, Mark Zuckerberg, Sara Blakely, Richard Branson, Arianna Huffington, and Jack Ma.

The second context in which charisma can be especially useful is the turnaround of an established company. In the late 1970s and early 1980s, Lee Iacocca’s personality helped persuade the federal government to loan Chrysler money to avoid bankruptcy, and then powered an advertising campaign to persuade consumers to buy its new line of K-cars and minivans. In the early 1990s, Lou Gerstner’s charisma helped create urgency and a mandate for change at slow-moving IBM. Jobs, who relied on charisma while founding Apple in the 1970s, relied on it again when he returned to revive the company in the late 1990s. In this century, Indra Nooyi and Ginni Rometty helped breathe new life into PepsiCo and IBM, respectively.

When Max Weber introduced the idea of charisma into the discussion of leadership, his feeling was that the rise of the large, modern, bureaucratic organization would put a premium on competence and rationality over charisma.  The value people attach to charismatic leadership has waxed and waned since then. Today when I work with newly appointed leaders in the new CEO workshop we conduct at Harvard Business School, it’s striking how many of them hope to avoid the limelight and minimize their public visibility. Twenty years after Khurana’s corrective analysis, many established firms have moved away from seeking celebrity CEOs. Think fast: Can you name the CEO of AT&T, Xerox, ExxonMobil, or UnitedHealth Group?

. . .

Rather than concluding that charisma is universally good or bad, or that Welch’s style of personality-driven leadership is something to embrace or avoid, it may be more helpful to carefully consider the circumstances when charisma may be more or less valuable.

For companies that are just starting out or in desperate need of a re-start, a larger-than-life charismatic leader may well be a considered choice.

Ultimately, a charismatic leader tends to be a high-risk, high-reward selection. In any setting, the risk that a charismatic leader could create harm (either through malfeasance, misbehavior, or hubris) is real and must be acknowledged.  At the same time, the odds of a turnaround working out or a startup idea becoming a category defining company are very low — and the benefits when they are successful can be enormous.

To the extent charisma can tilt these odds even modestly in the direction of success, the risks may be worth it.