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C-Suite | Issue 28 Fall 2018 | By Taylor Griffin & Courtney Hamilton, The Miles Group

When High-Performers Behave Badly

It happens more often than people want to talk about: One of the company’s highest performers behaves inappropriately, and negative repercussions cascade throughout and even far beyond the business line. Screaming profanities, demeaning subordinates in front of their teams, going behind the CEO’s back to the board — these things create a poisonous environment for anyone around this type of executive.
In the past, bad behavior from executives who delivered unique value to the business was often overlooked; boards might even tell the CEO to “just deal with it—he’s delivering.” But today, the risk around this kind of behavior is seen as much greater. Scrutiny around #MeToo and work-place harassment has raised the stakes for both management and boards and has caused one of their toughest challenges—what to do with that problem employee.
In our years working with the top of the house at companies, we have seen leaders become paralyzed when facing this situation. Below we’ll answer some of the key questions that arise when this emerges, and address what roles the CEO and the board should play to manage this risk to the company.

What Are the Types of Scenarios in Which Bad Executive Behavior Is Likely to Occur?
We see inappropriate behavior happening most often when a business is under stress, such as during challenging market conditions or in the wake of a natural disaster that impacts the business. During good times, it’s easier for even the most volatile people to behave well. But stressful times can uncover and amplify a host of negative behaviors—emotional outbursts, abusive language and confrontations that are focused on the personal rather than the professional.
There are also situations in which certain business lines operate a bit more independently, opening the door for an opportunistic executive to “go rogue.” A business run by a leader with a super-strong personality can isolate itself from the rest of the company in an unhealthy way, exhibiting a toxic culture that runs completely counter to the broader organizational culture.
CEOs aren’t always aware of bad behavior or a negative workplace climate right away. An executive may do well in “managing up”—keeping calm and cool and maintaining a good image with the CEO, and then turning around and acting terribly with subordinates. There may also be instances where the executive goes around the CEO and straight to the board to complain. He feels confident that this end-run around his boss will succeed because of his successful track record in performance numbers.
The sheer range of leader-driven dysfunctional scenarios is very broad—each unhappy corporate family is unhappy in its own way. What is common to all these situations, however, is the need for vigilance around talent assessment in good times and in bad.

How Can CEOs Manage a Toxic High-performer?
While underperforming executives are relatively easy to let go, CEOs often feel their hands are tied when it comes to someone who is not only delivering results but also well-known for delivering those great results. It is therefore essential to have the right steps in place to protect against that talent risk in the first place—to avoid having it blow up—and to mitigate that risk if and when it does arise among the top team:

    • Get the right data. To avoid having a serious work-place behavior issue devolve into a personal conflict with that executive rather than a business conflict, a CEO needs to have the right data. A company needs objective assessments of all executives that are conducted through an external process and fed back to the CEO and chief human resources officer (CHRO). Documenting the behavior cannot just be anecdotal.
    • Own the narrative presented to the board. Controlling the narrative around talent and how their strengths and weaknesses get communicated to the board is a key part of the CEO role. This entails presenting the hard data to the board—data that is truly objective and not colored by the CEO’s potential bias or preference. The CEO needs to put in place a process for reporting this data on an ongoing basis, bringing in development updates on everyone on his/her team and not just singling people out. In the absence of continuous data from the CEO as well as the CHRO, there is no narrative, and boards will fill in this vacuum with their own limited impressions that may not reflect reality.
    • Give equitable board exposure across theC-suite. There are executives who act badly with
    colleagues and even with the CEO who are savvy about cultivating special relationships with board members and winning them over through “offline” interactions. CEOs need to cut this off at the pass as much as possible and instead ensure that all of the top team members are getting fair access to the board. Boards can then see the full team and are more able to compare the toxic executive to his or her healthy/functional peers.
    • Maintain an ongoing agenda item around talent. Rather than waiting to raise talent concerns until things hit a crisis point, CEOs should have a consistent, ongoing agenda item about talent when talking to the board. CEOs can use these times to provide updates on developmental progress around the top team, and let the board know when there may be intermediary intervention required by the CEO.
    • Bring in support. In addition to leaning on the board as an advisor, the CEO typically works with the CHRO around top talent strategies, and the general counsel can be brought in for further risk mitigation if things get very bad. Another critical resource can be the CEO coach; the coach can help the CEO message his or her strategy and helps support the CEO in creating a narrative to communicate to the board.

What Role Does the Board Play in Helping Manage This Talent Risk?
When presented with a situation involving toxic executives, a board can best support the CEO by being a thought partner. This means staying hands-off but aware of the situation and ready to give support and back-up as the situation demands. And key to this advisory role is having access to information and data about the organizational talent and where any risks lie—all to be provided by the CEO (and the CHRO). Boards who are on top of talent risk tend to:

    • Expect regular reports of objective, externally gathered data about people filling critical roles—and if it doesn’t come, ask for it.
    • Assess whether the CEO is properly identifying talent risk across the organization, including business lines that might operate more autonomously.
    • Operate with healthy skepticism. Is the CEO covering up bad behavior—even with-out knowing? It’s tempting to give a lot of leeway to high-performing employees with great returns; ask if there is enough transparency in those situations.
    • Maintain awareness of talent issues as a growing reputational risk for organizations as scrutiny intensifies over workplace and sexual harassment.

Ultimately, an executive can sustain bad behavior for only so long before it blows up—with a lawsuit or business failure or toxic culture that drives away talent. As companies recognize the domino effect that negative conduct has across the organization, this kind of workplace behavior is, in fact, becoming more unacceptable—but it continues to be an ongoing risk for management and boards that demands a real process to address.

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