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(originally published by Booz & Company)


The Weakness of Positive Thinking

When an upbeat management style becomes excessive, it wards off reality and asks for trouble.

Title: Prozac Leadership and the Limits of Positive Thinking (Fee or subscription required)

Author: David Collinson (Lancaster University Management School)

Publisher: Leadership, vol. 8, no. 2

Date Published: May 2012

There is such a thing as too much positive leadership, according to this paper, which finds that a blind allegiance to organizational optimism lies at the heart of many of the financial miscalculations that drove the Great Recession. Countering the widely held view that positive thinking by leaders invariably challenges and inspires subordinates, the author coins the term “Prozac leadership” to describe how optimism tends to resemble a well-intended but addictive drug: It promotes artificial happiness and discourages critical reflection, leaving companies ill equipped to deal with setbacks.

Drawing on an analysis of nearly 200 studies of leadership, positive thinking, and organizational dynamics, the author acknowledges that the ability of supervisors to be persuasive is a key skill, and that optimism is one of the most effective communication methods. In fact, leaders’ positive narratives and vision can be transformational, improving innovation and teamwork, especially when employees are part of the strategic dialogue and trust their bosses.

But several recent studies have critiqued the positive thinking movement, highlighting the negative personal and organizational effects that can result from “excessive optimism,” “irrational exuberance,” “gambling against the odds,” and the “tyranny of positive thinking.” In short, Prozac leaders can wind up believing their own narrative that everything is going well. As a consequence, they ask fewer and fewer questions and become deaf to feedback that is “off message,” leaving them, and their companies, dangerously insulated from economic and social realities.

A 2003 study coined the term delusional optimism, which the author uses to describe the circumstances surrounding the acquisition by the Royal Bank of Scotland (RBS) of the Dutch bank ABN Amro in 2007. The £49 billion (US$98 billion) purchase was the biggest banking takeover in history, and it occurred just as the global recession began to bite. It was completed with insufficient risk analysis, little due diligence, and a disregard of red flags.

Because ABN was significantly exposed to the U.S. subprime mortgage crisis, the sheer size of the deal fundamentally weakened the balance sheet of RBS, which was bailed out by the U.K. government. Companies that “reward optimism and discourage pessimism are likely to undermine the capacity to think critically,” the author writes, applying the conclusion of the 2003 study to the RBS deal.

A 2010 paper examined the raging optimism of Wall Street and its damaging consequences, describing a “woo” culture of high-fives, motivational speakers, and loud cheering at a mortgage firm whose lending approach typified the risky expansion of credit. When one manager questioned the assumptions underlying the housing price boom, he was told, “You worry too much.”

“By insisting that subordinates’ upward communication [be] exclusively positive, Prozac leaders and the uncritical cultures they encourage can silence committed and concerned followers,” the author writes. In this context, employees may hold back on their views as a way of protecting their career, reputation, salary, and job security.

Indeed, leaders’ upbeat perspectives are not always accepted or internalized by their followers, the author says, and Prozac leadership can generate a wide range of responses and types of dissent. In addition to outright whistle-blowing or quitting in protest, disenchanted employees can engage in less overt subversions such as absenteeism and foot-dragging, studies have shown, or simply be at odds with the dominant workplace culture, creating tension.

For example, despite an oil company’s descriptions of its safety commitments as “unremitting,” “all-embracing,” and “our number one concern,” many workers on two of its North Sea oil rigs did not disclose accidents or near misses because of a “blame culture,” one study found. The workers complained that those who reported safety-related concerns were given poor assessments, affecting pay and employment security. “Assuming that concealment could not occur since this contradicted the learning culture,” the author writes, senior managers remained in the dark about safety problems on the rigs, a reflection of “their excessive optimism and distance from offshore practices.”

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