4 Side-Effects of Power That Can Destroy Your Family Business

How Power Can Ruin the Family Business

Famed English historian Lord Acton once said, “Power tends to corrupt, and absolute power corrupts absolutely.” The pages of history are filled with political, economic and military greats who, upon amassing great power, succumbed to hubris and their eventual undoing.

In the family business paradigm, members of the owning family often wield great power and influence within the enterprise. While this carries advantages such as quick decision-making, long-term strategic orientation, and positive impact on the community, it also leaves family firms vulnerable to the misuse of power. Therefore, it is vital that family businesses keep an eye out for telltale signs of mismanaged power within their organization. In this article, we have listed four scientifically proven ways in which power can negatively affect people and endanger the family firm:

1. Power makes people care less about others.

In 2008, researchers at the University of California Berkley studied pairs of strangers who told one another about an event that had caused them emotional suffering and pain, such as a death of a loved one. What they found was that participants with a higher sense of power experienced less compassion and distress when confronted with their partner’s suffering. In addition, these high-power participants exhibited lower blood pressure through autonomic emotion regulation, meaning that they were subconsciously “tuning out” the emotional state of their partner’s distress.

This lack of empathy was attributed to the fact that powerful people were not motivated to establish a connection with distressed individuals. Because they possess monetary and social resources at their disposal, powerful individuals are better equipped to deal with painful occurrences in their lives with little stress, which in turn makes them unable to relate to the pains of others in similar situations. Because wealthy and powerful individuals can hire help or use their status to influence outcomes, they have little need for social assets, which are often the only thing available for the less privileged.

Tuning in to the needs and feelings of another person is a prerequisite to empathy, which in turn can lead to understanding, concern, and appropriate action. Should certain family members forget how to muster such feelings, the result would be an increasing divide between all stakeholders, creating a toxic environment and fuelling resentment. Furthermore, this lack of empathy can drive a wedge between family members of differing levels in the hierarchy, causing younger members in particular to feel unappreciated and unheard by more powerful members of the family.

2. Power causes people to lie more.

In one Columbia Business School study, subjects were divided into two roleplaying groups: bosses and employees. They were then instructed to steal a $100 bill, and were told that if they could convince an interviewer that they had not stolen the money, they could keep it. Worryingly, researchers found that the subjects playing boss not only lied more, but also did so more easily and effectively, displaying no evidence of stress, cognitive impairment, or feelings of remorse.

The data from this experiment revealed that subjects assigned leadership roles were “protected” from the negative effects of lying. Generally, lying causes us to feel bad, is physiologically taxing, and overworks cognitive functions, but feelings of power actually enhance cognitive abilities and make people feel good. This means that the powerful can tell a lie without feeling the usual distress symptoms, making them more inclined to tell untruths and do so comfortably and effectively.

This deceptive side effect of power can wreak havoc in the family business where trust is a key asset. In many cases positions of power in the family business are held by members of the owning family, and should the scientific data hold true, this inclination can permeate the work culture.

3. Power causes people to make reckless decisions.

In a study by psychologists at Ohio State University, subjects were divided into bosses and employees, and were shown an advertisement for a mobile phone. Half of the participants viewed an ad featuring strong arguments for buying the phone by touting its many features, while the other half viewed an ad that featured weak and nonsensical reasons. When the subjects were asked to rate the quality of the phone, those playing boss were seen making up their mind regardless of how good the argument of the ad was.

Researchers found that when the subjects were placed in a position of power, they were far more likely to have already made up their minds, and this confidence causes them to pay little or no attention to new information. Instead of analyzing the strengths of various arguments, they were more concerned with whether or not the argument confirmed their initial beliefs. Arguments that didn’t support their beliefs were simply discarded.

While confidence is certainly a prerequisite for positive and effective leadership, this research demonstrates that power can easily distort one’s ability to evaluate information and make complex decisions. This can have negative consequences for the family business, especially considering the amount of power and influence family members might have in the corporate decision-making process.

4. Power distorts the perception of time.

Researchers at the University of California at Berkeley took subjects who were assigned boss and employee roles and told them that they’d be solving brainteasers. The boss group was told that they’d be allowed to make decisions on which brain teaser to solve and how to divide the prizes at the end of the exercise, while the employee group would go along with the bosses’ decision. They were then given a questionnaire that surveyed how each group perceived the time available to do the exercise. The results indicated that those playing bosses were far more likely to overestimate how much time they had, while the employee group felt that they had too little time.

This mismatch of time perception occurs because those in places of power believe that they have more time at their disposal than others. The control that powerful people exercise over many aspects of their lives carries over to their sense of time, meaning that they believe that they can also control time. This distorted perception also means that powerful individuals are generally less stressed, but more inclined to underestimate how much time it will take to complete a task.

By overestimating the amount of time available to them, powerful members of the family can potentially waste precious time or make flawed judgment calls when pressed for quick decisions. This can also negatively affect employees who do not have the luxury of freely allocating time to a task and cause productivity to decrease. Finally, research indicates that part of the reason why powerful people misjudge time required to complete a task is because they are too focused on the end result instead of the process, meaning that family members would do well to adequately address this aspect in order to maximize everyone’s time to its full potential.

This article was originally published on LinkedIn by Senior Editor James Lee.