B00AFPTSI0 EBOK (6 page)

If you’ve ever put your guard up when meeting a new colleague, it’s probably because you thought you picked up on the scent of self-serving motives. When we see a taker coming, we protect ourselves by closing the door to our networks, withholding our trust and help. To avoid getting shut out, many takers become good fakers, acting generously so that they can waltz into our networks disguised as givers or matchers. For the better part of two decades, this worked for Ken Lay, whose favors and charitable contributions enabled people to see him in a positive light, opening the door to new ties and sources of help.

But it can be difficult for takers to keep up the façade in all of their interactions. Ken Lay was charming when mingling with powerful people in Washington, but many of his peers and subordinates saw through him. Looking back, one former Enron employee said, “If you wanted to get Lay to attend a meeting, you needed to invite someone important.” There’s a Dutch phrase that captures this duality beautifully: “kissing up, kicking down.” Although takers tend to be dominant and controlling with subordinates, they’re surprisingly submissive and deferential toward superiors. When takers deal with powerful people, they become convincing fakers. Takers want to be admired by influential superiors, so they go out of their way to charm and flatter. As a result, powerful people tend to form
glowing first impressions of takers
. A trio of German psychologists found that when strangers first encountered people, the ones they liked most were those “with a sense of entitlement and a tendency to manipulate and exploit others.”

When kissing up, takers are often good fakers. In 1998, when Wall Street analysts visited Enron, Lay recruited seventy employees to pretend to be busy traders, hoping to wow the analysts with the image of a productive energy trading business. Lay led the analysts through the charade, where the employees were asked to bring personal photos to a different floor of the building so it looked like they worked there, and put on a show. They made imaginary phone calls, creating a ruse that they were busy buying and selling energy and gas. This is another sign that Lay was a taker: he was obsessed with making a good impression upward, but worried less about how he was seen by those below him. As Samuel Johnson purportedly wrote, “The true measure of a man is how he treats someone who can do him absolutely no good.”

Takers may rise by kissing up, but they often fall by kicking down. When Lay sought to impress the Wall Street analysts, he did so by exploiting his own employees, asking them to compromise their integrity to construct a façade that would deceive the analysts. Research shows that as people gain power, they feel large and in charge: less constrained and freer to express their natural tendencies. As takers gain power, they pay less attention to how they’re perceived by those below and next to them; they
feel entitled to pursue self-serving goals
and claim as much value as they can. Over time, treating peers and subordinates poorly jeopardizes their relationships and reputations. After all, most people are matchers: their core values emphasize fairness, equality, and reciprocity. When takers violate these principles, matchers in their networks believe in an eye for an eye, so they want to see justice served.

To illustrate, imagine that you’re participating in a famous study led by Daniel Kahneman, the Nobel Prize–winning psychologist at Princeton. You’re playing what’s known as the
ultimatum game
, and you sit down across the table from a stranger who has just been given $10. His task is to present you with a proposal about how the money will be divided between the two of you. It’s an ultimatum: you can either accept the proposal as it stands and split the money as proposed, or you can reject it, and both of you will get nothing. You might never see each other again, so he acts like a taker, keeping $8 and offering you only $2. What do you do?

In terms of pure profit, it’s rational for you to accept the offer. After all, $2 is better than nothing. But if you’re like most people, you reject it. You’re willing to sacrifice the money to punish the taker for being unfair, walking away with nothing just to keep him from earning $8. Evidence shows that the vast majority of people in this position reject proposals that are imbalanced to the tune of 80 percent or more for the divider.
*

Why do we punish takers for being unfair? It’s not spite. We’re not getting revenge on takers for trying to take advantage of us. It’s about justice. If you’re a matcher, you’ll also punish takers for acting unfairly toward
other
people. In another study spearheaded by Kahneman, people had a choice between splitting $12 evenly with a taker who had made an unfair proposal in the past or splitting $10 evenly with a matcher who had made a fair proposal in the past. More than 80 percent of the people preferred to split $10 evenly with the matcher, accepting $5 rather than $6 to prevent the taker from getting $6.

In networks, new research shows that when people get burned by takers, they punish them by
sharing reputational information
. “Gossip represents a widespread, efficient, and low-cost form of punishment,” write the social scientists Matthew Feinberg, Joey Cheng, and Robb Willer. When reputational information suggests that someone has taker tendencies, we can withhold trust and avoid being exploited. Over time, as their reputations spread, takers end up cutting existing ties and burning bridges with potential new ties. When Lay’s taking was revealed, many of his former supporters—including the Bush family—distanced themselves from him. As Wayne Baker, a University of Michigan sociologist and networking expert, explains, “If we create networks with the sole intention of
getting something
, we won’t succeed. We
can’t
pursue
the benefits of networks
; the benefits ensue from investments in meaningful activities and relationships.”

Before we make the leap of investing in relationships, though, we need to be able to recognize takers in our everyday interactions. For many of us, a challenge of networking lies in trying to guess the motives or intentions of a new contact, especially since we’ve seen that takers can be quite adept at posing as givers when there’s a potential return. Is the next person you meet interested in a genuine connection or merely seeking personal gains—and is there a good way to tell the difference?

Luckily, research shows that takers leak clues. Well, more precisely, takers
lek
clues.

In the animal kingdom,
lekking
refers to a ritual in which males show off their desirability as mates. When it’s time to breed, they gather in a common place and take their established positions. They put on extravagant displays to impress and court female audiences. Some do mating dances. Some sing alluring songs. Some even do acrobatics. The most striking display of lekking occurs among male peacocks. Each mating season, the males assume their positions and begin parading their plumage. They strut. They spread their feathers. They spin around to flaunt their tails.

In the CEO kingdom, takers do a dance that looks remarkably similar.

In a landmark study, strategy professors Arijit Chatterjee and Donald Hambrick studied more than a hundred
CEOs in computer hardware and software companies
. They analyzed each company’s annual reports over more than a decade, looking for signs of lekking. What they found would forever change the face of leadership.

It turns out that we could have anticipated the collapse of Enron as early as 1997, without ever meeting Ken Lay or looking at a single number. The warning signs of Enron’s demise are visible in a single image, captured four years before the company unraveled. Take a look at the two pictures of CEOs below, reproduced from their companies’ annual reports. Both men started their lives in poverty, worked in the Nixon administration, founded their own companies, became rich CEOs, and donated substantial sums of money to charity. Can you tell from their faces—or their clothes—which one was a taker?

The man on the left is Jon Huntsman Sr., a giver whom we’ll meet in chapter 6, from his company’s 2006 annual report. The photo on the right depicts Ken Lay. Thousands of experts have analyzed Enron’s financial statements, but they’ve missed an important fact: a picture really is worth a thousand words. Had we looked more carefully at the Enron reports, we might have recognized the telltale signs of takers lekking at the helm.

But these signs aren’t where I expected to find them—they’re not in the faces or attire of the CEOs. In their study of CEOs in the computer industry, Chatterjee and Hambrick had a hunch that takers would see themselves as the suns in their companies’ solar systems. They found several clues of takers lekking at the top. One signal appeared in CEO interviews. Since takers tend to be self-absorbed, they’re more likely to use first-person singular pronouns like
I
,
me
,
mine
,
my
, and
myself
—versus first-person plural pronouns like
we
,
us
,
our
,
ours
, and
ourselves
. In the computer industry, when talking about the company, on average, 21 percent of CEOs’ first-person pronouns were in the singular. For the extreme takers, 39 percent of their first-person pronouns were in the singular. Of every ten words that the taker CEOs uttered referencing themselves, four were about themselves alone and no one else.

Another signal was compensation: the taker CEOs earned far more money than other senior executives in their companies. The takers saw themselves as superior, so they felt entitled to substantial pay discrepancies in their own favor. In the computer industry, a typical taker CEO took home more than triple the annual salary and bonus of anyone else in the company. By contrast, the average across the industry was for CEOs to earn just over one and a half times the next highest paid. The taker CEOs also commanded stock options and other noncash compensation of seven times higher than the next highest paid, compared with the industry average of two and a half times higher.
*

But the most interesting clue was in the annual reports that the companies produced for shareholders each year. At the top of the next page are the pictures of Ken Lay and Jon Huntsman Sr. that I showed you before, but now they’re in context.

The photo on the left appeared in Huntsman’s 2006 annual report. His image is tiny, taking up less than 10 percent of the page. The photo on the right appeared in Enron’s 1997 annual report. The image of Lay takes up an entire page.

When Chatterjee and Hambrick looked at the annual reports from the computer companies, they noticed dramatic differences in the prominence of the CEO’s image. In some annual reports, the CEO wasn’t pictured at all. In other reports, there was a full-page photo of the CEO alone. Guess which one is the taker?

For the taker CEOs, it was all about
me
. A big photo is self-glorifying, sending a clear message: “I am the central figure in this company.” But is this really a signal of being a taker? To find out, Chatterjee and Hambrick invited security analysts who specialized in the information technology sector to rate the CEOs. The analysts rated whether each CEO had an “inflated sense of self that is reflected in feelings of superiority, entitlement, and a constant need for attention and admiration . . . enjoying being the center of attention, insisting upon being shown a great deal of respect, exhibitionism, and arrogance.” The analysts’ ratings correlated almost perfectly with the size of the CEOs’ photos.

At Enron, in that prescient 1997 report, the spotlight was on Ken Lay. Of the first nine pages, two were dominated by giant full-page images of Lay and then-COO Jeff Skilling. The pattern continued in 1998 and 1999, with full-page photos of Lay and Skilling. By 2000, Lay and Skilling had moved up to pages four and five, albeit with smaller images. There were four different photos of each of them, like a filmstrip—only they were better fit for a cartoon. Three of the photos of Lay were virtually identical, revealing the subtle, smug smile of an executive who knew he was special. A fairy-tale ending was not in the cards for Lay, who died of a heart attack before sentencing.