BC Business
BAD APPLES | (Clockwise from top left) Martin Shkreli, Dick Fuld, Al “Chainsaw” Dunlap, Bernie Madoff, Bernie Ebbers, Mr. Burns
Bernie Madoff. Bernie Ebbers. Dick Fuld. Martin Shkreli. Al “Chainsaw” Dunlap. Their names have become synonymous with remorseless greed, corruption, fraud and even a rare breed of ruthless predator known as the psychopath. They’ve laid waste to companies and wreaked havoc on people, from the penthouse to the retirement home. How do they reach such positions of power and influence? More importantly, how can business owners and HR departments prevent them from infiltrating the ranks?
“If I hadn’t been able to study psychopaths in prison, I would have gone down to the Vancouver Stock Exchange in the late ’80s, when Forbes called it the scam capital of the world,” says Robert Hare, the 82-year-old UBC professor emeritus and creator of the Psychopathy Checklist (PCL-R). While the PCL-R has become the gold standard test for identifying psychopathy among prisoners, Hare has been warning about non-criminal psychopaths since he wrote his bestselling book Without Conscience in 1993.
“Most psychopaths are not killers, or even convicted criminals,” he explains over cappuccino at his home near Horseshoe Bay. “Psychopaths have a predatory life strategy that can be advantageous in some fields, including the corporate world, politics, academia, the entertainment industry—anywhere with a power structure where people can take advantage of others. They survive and thrive in a competitive world—anywhere style trumps substance. Like the cat with the mouse, the world is their prey. But how do you make a proper assessment of psychopathy in the workplace?
It’s a question Hare and a growing number of behavioural scientists working in the field of industrial and organizational psychology (IO for short) have spent the last few decades trying to answer, with their primary weapons being personality tests that measure key traits and behaviours. Such tests gained popularity in the 1940s with the Myers-Briggs Type Indicator, and over the past three decades, new and improved tests have increasingly become key tools for selecting employees and gauging workplace performance.
They’ve also become serious business—for corporations and the IO psychologists they hire. A median of 50 per cent of management employees ultimately fail to do a good job, based on a dozen different surveys of managerial performance at U.S. and European companies done since 1985, and a 2012 Gallup poll found that companies fail to pick the right manager 82 per cent of the time. The price of a bad hire is as much as double an employee’s salary in related expenses, ranging from selecting a replacement to a company’s overall lost productivity, and replacing a senior manager can cost a company up to US$2.7 million (based on a 1999 study by Chicago-based IO psychologist Brad Smart), excluding many other hidden costs such as severance packages, lost intellectual resources, decreased staff morale and increased staff turnover.
While incompetent and unproductive employees hurt an organization, white-collar criminals can kill businesses and decimate markets. According to a 2014 report from the Association of Certified Fraud Examiners, Canadian companies lost a median of US$250,000 to employee fraud, more than $100,000 above the global median. And then there are the more extreme examples—such as Canadian-born Bernie Ebbers’s fraudulent accounting practices, which led to US$11 billion in losses, bankrupting WorldCom and leading to 17,000 people losing their jobs. With Dick Fuld at the helm, Lehman Brothers’ participation in the subprime mortgage crisis pushed global market losses into the trillions, leading to a US$700-billion industry bailout.
Since the 2008-09 financial crisis, corporations have increasingly looked for methods to identify toxic personalities, often by hiring IO psychologists (which became the fastest growing occupation in 2014, according to the U.S. Bureau of Labor Statistics). Historically, personality tests looked for so-called “bright side” traits—including the “Big Five” model that measures extraversion, agreeableness, emotional stability, openness to experience and conscientiousness. But over the past two decades, IO researchers have increasingly relied upon tests that measure “dark traits” such as manipulation, lack of empathy, grandiosity, self-entitlement, impulsivity and aggression.
Dark trait research began in the late ’60s, when V. Jon Bentz, a retired HR executive at Sears, began a 30-year study of new managers at the company, ultimately finding that 50 per cent failed as a result of personality defects, including failure to delegate, poor team-building, slow learning, and reactionary and emotional decision-making. Similar findings were replicated by other researchers in the ’80s and ’90s—including Joyce and Robert Hogan, a husband-and-wife team of IO psychologists, who found that higher scores on dark personality traits were better predictors of job performance than the Big Five model.
Today, the majority of research on dark traits in the workplace has singled out three distinct yet overlapping traits—narcissism, Machiavellianism and psychopathy—known as “the Dark Triad” (a term coined by UBC professor and behaviour psychologist Del Paulhus in 2002). Paulhus’s Dark Triad self-report test has since been used by IO researchers to gauge the traits most often linked to counterproductive or unethical behaviour among managers—from the innocuous (poor attendance and laziness) to the potentially dangerous (vengefulness, racism and fraud).
Robert Hare, an Order of Canada recipient, officially retired in 2000 but shows no signs of slowing down—developing variations of the PCL-R to assess youth and children, and juggling a busy schedule of lectures and training workshops with FBI profilers, forensic clinicians and prison staff. He remains unquestionably the most seasoned player in this burgeoning field of behavioural science research, after devoting more than 50 years of research to psychopathy. “The Hare”—as the PCL-R test is known in forensic psychology—is now used around the globe to assess dangerous offenders, primarily those seeking parole, since up to 80 per cent of PCL-R rated psychopaths (with scores of 30 to 40; an average prisoner score is 22) will reoffend within three years of parole.
Research indicates that psychopaths represent only one per cent of the general population, but Hare has long suspected that there’s a higher incidence in the corporate world. A corporate psychopath, he says, is “somebody with psychopathic propensities and who is well-bred, brought up in a professional environment, physically attractive, verbally facile, has the right schooling and contacts. Once you’ve got a psychopath inside, they can manipulate, lie, cheat and swindle their way right to the top.”
Hare first started to research the corporate psychopath back in the early ’90s after receiving a phone call from Paul Babiak, a New York-based organizational psychologist. Babiak had been hired by a high-tech firm to do team-building exercises to resolve some internal conflict; he quickly suspected that his client had a psychopath in its ranks. “Dave, the team leader, impressed me,” recalls Babiak when reached at his office just north of New York City. “He was on an accelerated track, called a ‘high potential employee’; some of the staff worshipped him, and the senior managers loved him; he was good-looking, had a beaming, confident smile. But a splinter group really hated him—thought he was a snake, a pathological liar and back-stabber, always blaming others for his failures. Then, overnight, the team was disbanded. Dave was promoted; his boss sent to Siberia.”
Armed with a heap of data about Dave, Babiak did the PCL-R test on him: he scored one point above the threshold for psychopathy. Babiak then gained unprecedented access to various U.S. corporations that permitted him to do the test on over 200 upper-level employees who had been singled out for management development programs. He found that four per cent scored 30 or more on the PCL-R. The corporate high-scorers also had high performance ratings from their bosses for charisma, creativity, strategic thinking and good communication skills, even though the same boss gave them low grades for responsibility, performance and team skills—in other words, they only appeared to be great leaders.
The findings fuelled Babiak and Hare to develop a workplace-friendly assessment instrument that could be used by HR staff with no clinical training and also by small business owners. The PCL-R wasn’t appropriate because it was designed for registered psychologists, ideally those with a forensics background; in the business world, anti-discrimination laws prohibit any form of pre-employment medical diagnosis of personality disorders. Any IO-friendly test for the corporate world had to be tailored to detect non-clinical levels of psychopathy and capture only workplace-related traits and behaviours. Defining traits—charm, deceit, intimidation and especially lack of empathy—remained, but they eliminated certain PCL-R checklist items, such as criminal history, addictions and sexual proclivities. They also chose to package it as a combination of two questionnaires: a self-report and an observer-rated questionnaire for an employee’s colleagues and subordinates—not unlike the popular 360 performance reviews.
The B-Scan 360, as Babiak and Hare’s product is called, started to take shape in the early 2000s—field tested among IO psychologists, and U.S. HR departments and business employees. They also studied a comparison group of U.S. white-collar criminals (granted parole instead of hard time, for fraud and embezzlement) to establish a spectrum from low- to high-risk traits. In their 50:50 partnership, Babiak brought industry experience and contacts to conduct the field research while Hare had the scientific expertise to analyze and validate complex data. As industry data trickled in, the pair also co-authored a 2006 book about corporate psychopaths called Snakes in Suits.
By 2012, the B-Scan 360 checklist was down to its current 20-item list, targeting four personality domains: manipulative/unethical (glib, charm and deceit), callous/insensitive (“cold inside” and remorseless), unreliable/unfocused (no loyalty or goals), and intimidating/aggressiveness. The measures ask participants to rank statements on a five-point scale, from strongly agree to strongly disagree, including “Sympathy is pointless in the workplace” and “Being intimidating in the workplace is a huge advantage”; for co-workers, it presented statements such as “Comes across as smooth, polished and charming” and “Shows no regret for making decisions that harm the company, shareholders, or employees.”
So far approximately 600 Canadian workers in the public and private sector have beta tested the B-Scan, with Babiak and Hare hoping to make it available to industry and HR departments by the end of 2016. Yet, despite evidence that the corporate world is long overdue for such a test, among those practising in the field it’s unclear how much employers really want to weed out the bad apples.
“Over the years, too many CEOs and HR professionals have asked me for advice on how to hire a psychopath,” says Cynthia Mathieu, an IO who has conducted research with the B-Scan for the past five years, recently relocating from Montreal to Vancouver to work closely with Hare. Companies mistakenly may think they will profit from having ruthlessly competitive employees, says Mathieu, “but the truth is that psychopathic individuals are not loyal to anyone but themselves.”
The assessment industry makes thousands of different personality, aptitude and competency tests–and anywhere from US$500 million to US$2 billion yearly on leadership programs and coaching. Myers-Briggs is used by 89 of the Fortune 100 companies and nets its publisher US$20 million yearly, even though IOs avoid it due to lack of scientific validation.
“It’s buyer beware in the personality test marketplace,” says Larry Stefan, of Stefan, Fraser & Associates, a large Vancouver-based IO firm made up of eight registered IO psychologists and one management consultant. Stefan has access to over 4,000 personality tests. “For $200 you can test a bunch of people, but most are simply crap. Predictive accuracy is sometimes lower than the predictive value of an interview,” he says, adding that people can easily outfox self-report questionnaires, so his firm does a battery of personality tests to look for a variety of red flags, especially high noncompliance, impulsivity, defensiveness and aggression. His team also has a PhD student, Thomas Wiens, on staff to research data and “enhance the detection of dark side qualities” because personality, particularly psychopathy, is hard if not impossible to change.
“Personalities are very consistent throughout a person’s life,” he says. “People have great difficulty doing things outside the nature of their core personality traits–in behaviour psychology it’s called instinctual drift. You can try to get people to do things differently, but they’ll typically drift back to their core traits, especially in high-stress situations.”