Study Finds ‘High-Power’ People Unaware of Risks – Yeah, They Buy Way Out While We Pay the Price

  • February 21, 2013, 5:25 PM

By Samuel Rubenfeld

From MF Global‘s MFGLQ +8.55% Jon Corzine to Aubrey McClendon of Chesapeake Energy CHK -0.25%, the highest levels of the corporate world are populated by risk-takers who sometimes veer into reckless behavior.

Associated Press – Wall Street Journal Blog
Former MF Global Holdings Ltd. Chairman and Chief Executive Officer Jon Corzine testifies on Capitol Hill in Washington on Dec. 15, 2011.

A new study in the Journal of Experimental Social Psychology provides some insight into this behavior by exploring the differences between “low power” and “high power” individuals. One conclusion it draws is that companies should seek a balance of such personalities, with risk-taking leavened by risk-aversion.

The high-power individuals in the study had more trouble recalling information that would get in the way of a goal, while they had the same retention levels of information that would facilitate reaching a goal.

“Constraints simply aren’t on the minds of people in power,” said Katie Liljenquist, an assistant professor at the Brigham Young University Marriott School of Management who co-wrote the study, in an interview.

Of course, many business people are successful because they don’t recognize constraints, but that also engenders a higher tolerance for risk that can get companies into trouble.

Two experiments led to the study’s conclusions. First, the researchers tested how power affects memory for goal-facilitating and goal-constraining information. They divided their subjects by establishing conditions: those deemed high-powered people for the experiment were told to recall a time in which they had power over someone, while those deemed low-power were told to recall a time someone had power over them.

The subjects were then presented with 18 statements, half with information that would constrain their goal, and the other half with information that would facilitate a goal.

“People in positions of power have a clear vision of what they want to accomplish,” Liljenquist said. “Not only are they not aware of potential constraints, they don’t want to know about them. They have a clear preference for goal-facilitating information rather than goal constraining.”

The second experiment required the subjects to imagine they tried to circumnavigate the globe, and they had to imagine spending “points” to go ahead.

Liljenquist said the study found that lower-power individuals spent their points on things that would prepare them for the perilous journey, while high-power people damned the torpedoes and went full-speed ahead, no matter how prepared.

She said, in the corporate context, the ideal is for an organization to “harness both strengths” using people who exhibit the traits of having high-power, as well as those with low-power tendencies.

High-power people see the world with blinders, Liljenquist said, while lower-power people have a more comprehensive view and see pitfalls. That being said, she added, low-power people are just as much in need of a high-power individual.

“It’s easy to understand how a lack of power is self-perpetuating. You [also] need the power to say, ‘don’t ask, just do it,’” she said.

Write to Samuel Rubenfeld at Follow him on Twitter at @srubenfeld.