Powerful CEOs don’t take advice from others

On April 8, 2013, Ron Johnson, who earlier had reinvented retail at Apple, was ousted from his job as CEO of J.C. Penney. 17 months earlier, Johnson had been brought in to refresh the retailer’s dowdy image, to bring in new customers and to raise profit margins.

One analyst described Johnson’s tenure at Penney as “an unmitigated disaster”. J.C. Penney sales fell 25% (i.e. minus $4.3 billion) in the year ending February 2, 2013. For the full year, Penney posted a loss of $985 million.

So, why did Johnson – who had built a successful line of retail stores at Apple – fail so miserably at J.C. Penney?

A New York Times article reflecting on Johnson’s management style describes Johnson as someone who: 1) had a lot of confidence in his own judgment, and 2) was not really interested in other people’s opinions.

Confidence:

“He began poking fun at Penney’s way of doing business. He was pretty sarcastic about our marketing and how ridiculous it was”.
“Mr. Johnson believed his taste was paramount”.
“His hubris finally did him in”.

No advice from others:

“When employees pushed back on Mr. Johnson’s strategies, they got nowhere. Mr. Johnson seemed to pay little attention to their doubts”.
“He ignored a study Penney had just completed on customer preferences”.
“He did not ask for input from his staff”.

The story of Johnson at J.C. Penney seems like a perfect illustration of the research results reported in a paper by See et al. (2011) in which the authors report on the findings of a study on the effect of power on advice-taking behavior.

Managers are constantly making decisions. Knowing how and when to combine external input with one’s own judgments has important implications for the quality of these decisions. A recurring finding in the advice-taking literature is that people tend to NOT alter their judgments very much based on inputs from other people. Even in the face of other information, people tend to stick to their own initial beliefs.

In the See et al. study, the authors are assessing the effect of power on a person’s willingness to take advice from others. The psychological experience of power can have an effect on people’s cognition and behavior. Consequently, the authors hypothesize that “… as power increases, the tendency to take advice will decrease, thereby exacerbating the natural inclination people have to discount advice from others, even when that advice could help them to make better decisions”(p. 276). They also argue that “greater power will be associated with greater confidence in one’s judgment” (p. 277). In combination then, people’s confidence in the accuracy of their own beliefs will lead them to listen too little to the advice from others.

One of the studies which the authors describe in their paper uses a Judge Advisor approach. In a Judge Advisor study, participants provide answers to a set of questions. They are then provided with the answers of an advisor and given the opportunity to revise their initial judgments before submitting their final answers. The research results showed that individuals who rated themselves as having more power in their relationships with others took less advice. This effect occurred because greater power was associated with greater confidence in one’s own initial answers, which in turn reduced willingness to revise those initial judgments in the direction of the advisor’s input.

All other studies on which the authors report in their paper revealed similar results. Based on the findings of all four studies, the authors draw the following conclusions.

The psychological experience of power elevates confidence and exacerbates the already strong tendency for individuals to overweight their own initial judgments and insufficiently incorporate input of others.
Power can lead people to be less open to factual advice even when that advice can improve performance.

The demise of Johnson at J.C. Penney serves as a useful reminder of the need to always keep an open mind. Never stop listening.

Bibliography

NY Times: How an Apple star lost his luster at Penneys, Stephanie Clifford (2013) 
See, E.K., E.W. Morrison, N.B. Rothman & J.B. Soll (2011) The detrimental effects of power on confidence, advice taking, and accuracy, Organizational Behavior and Human Decision Processes, Vol. 116, No. 2, pp. 275-285.