Peoples’ perceptions and
views of the world are influenced by both conscious and unconscious phenomena.
The world is a totally socially constructed reality where the people make sense
of it from their culture, experience and learning. Within the bounds of culture
and experience, each person has some unique interpretation of the environment
and understanding of its dynamics. Thus everything can be viewed with multiple
perspectives or realities.
A person’s psychological
state will directly influence perception of people, objects and events. This
can potentially lead to perceptive distortion, especially if the person has any
Therefore any construed reality, decisions made, strategies crafted, resulting
actions and consequential behavior would be based upon biased perceptions. Thus
everything that develops within a firm including culture, management style,
interpersonal relationships, rules and procedures, strategy, symbols and
behavior will have some unconscious basis to it (Kets de Vries & Miller
As different psychotic
states channel perception and thinking into specific frames, this becomes
relevant to how people see opportunity and take action to exploit it. Thus
perception and thinking processes that identify opportunities and shape
subsequent actions have their origins both in the psych and the external world.
Identifying an opportunity and exploiting it may have as more to do with inner
needs i.e., recognition, love and
affection, power and control, self esteem, or grandeur, etc., as with any
rational thought processes.
Cognitive distortion and
delusion are more likely to occur at the extremities of the psychotic
continuum. However, most people whose personalities can be considered within
the bounds of normality will exhibit some psychotic traits. This can include
compulsion, anxiety, depression, attention seeking, fantasies, irrational
fears, paranoia, shyness or narcissistic behavior, etc. For example,
psychographic research shows there are large variations in the levels of
depression across regions (Cohen, Slomkowski & Robins 1999).
It is usually very
difficult to see abnormality as many psychotic traits are also important
drivers of manager and entrepreneur behavior. Many well known business leaders
could be considered narcissistic in nature (Maccoby 2000). Some forms of
psychosis (attention-seeking, paranoia,
obsessive-compulsiveness & narcissism) are actually qualities that help
bring people to the top of their fields. However these same qualities in excess
can lead to an arrogant and overconfident delusion, once at the top. Many
managers have fallen from corporate grace for this reason (Kramer 2003).
Psychosis can prevent
firms seeing the environment in new ways and hinder the process of creativity
and innovation. US industry faced this situation in the 1970s and 80s when
rising energy costs changed the competitive environment and new competition
came from Japan and East Asia. The leaders of US industry failed to see the
need to adapt to the changing market environment. Many companies hung onto
their old perceptions and failed to see the realities of their new environment
and the need to change. This cost many companies very dearly for this delusion
Firms and organizations
can also show ‘collective’ patterned
behaviors just like individuals and groups. Individual and group psychosis has
been well researched and written about. However ‘collective’ firm and organization psychosis has been the subject
of only a small handful of articles and books, and generally ignored in
management theory. The psychotic paradigm is useful in looking at the issues of
how a person sees and constructs meaning, how a person’s needs influence the
decisions they make, and how psychological pathologies affect behavior.
There are a number of
basic psychotic pathologies which can affect both perception and behavior.
These pathologies include the paranoid, obsessive-compulsive, attention-seeking,
depressive, schizoid and narcissistic typologies shown in figure 1. These are
not absolute disorders and may vary in intensity from organization to
organization. Some psychotic conditions may act in together with other forms of
psychosis creating part of a complex personality.
Looking for evidence of these typologies can assist in seeing the way others
see the world and form their underlying assumptions.
Figure 1. The Continuum
of Psychotic Organizational Typologies
Paranoia is based on an
intense fear, suspicion of others (both internal and external to the
organization) that is exaggerated or irrational. Paranoia usually brings with
it deluded perceptions that the person ‘is
being singled out by enemies’, who are harming or intend to harm him/her.
Paranoia is ego-centric because it is about ‘I’
and ‘me’ and usually sees another as ‘out to get him/her’ (persecutory
complex). People with paranoid tendencies tend to see the world as a
threatening place and are usually very guarded until they know their fears are
groundless. This leads to little loyalty towards others.
interpersonal behavior is generally governed with the belief that ‘people somehow have it in for him/her’.
Paranoid people tend to avoid relationships. However relationships they do form
tend to be cold, lack intimacy and involve jealousy and suspicion, i.e., the other person is doing something
harmful behind his/her back. They are usually very sensitive to criticism
and will brood for long periods of time if criticized. Criticism can also
invoke anger, argumentation, and uncompromising stands which often lead to
great antagonism, if challenged. Even though they are very sensitive to
criticism themselves, they are very critical of others. Anything that goes
wrong is someone else’s fault and not theirs.
Paranoia is usually
focused on the present where someone is trying to undermine him/her and the
future, where someone is plotting a plan to harm him/her. Suspicions based on
past experience cannot be classed as paranoia when experience as a basis of
concern. However, if this concern is blown out of proportion to any potential
harm that can be done, paranoia is present.
Paranoid people have the
urge to collect as much information about the market as possible. They will
scan for information of threats and spend a large amount of time thinking how
to formulate reactions to them. They are in fact looking for evidence that
reinforces their suspicions but at the same time pride themselves on their
rationality and objectiveness. They centralize organization decision making
because of lack of trust in other peoples judgments and their beliefs that
people are looking for ways to sabotage him/her. Consequently budgeting and
controls will be very strict. The organization culture will be one of suspicion
where looking for problems and wrong doers (scapegoats) is the norm.
The resulting crafted
strategies are primarily designed to protect the company’s position and defend
it from any potential competitor attacks rather than be proactive moves in the
marketplace and take risk. Therefore the firm will miss many opportunities to
be creative and innovative in the market. Paranoid companies tend to lag behind
the competition and muddle through with disconcerted and inconsistent
strategies. They will follow the market leader rather than risk being
innovative with their own ideas. However they will very easily revert to legal
litigation if they believe harm has been done to them. Paranoid people will
tend to avoid certain products and markets if they believe there is a more
powerful competitor in the market.
Paranoia usually occurs
when there is some form of traumatic and stressful issues or some challenge
arising. In many cases paranoia will be a temporary condition until the
immediate sources of stress pass. Paranoia can also be a selective phenomena
where an object, event or situation. For example, the belief that ‘multinational companies always target local
companies for takeover’ will influence perception and behavior.
Paranoia can also merge
with the schizoid typology where a strong persecutory complex develops.
Paranoia sufferers can also develop grandiose delusions where he/she believes
they have particular skills or abilities to carry out a special mission, but
someone has a master plan to prevent him/her from successfully fulfilling their
calling. Such a fantasy was shown in the movie The Blues Brothers where Jake
and Elwood believed they were on ‘a
mission from God’ and being prevented from carrying out their calling by a
number of groups (the police, the sheriff, the other group and eventually the
whole United States armed forces).
A mild form of the
paranoia typology could be positive where the organization will have good
knowledge of its external threats and opportunities and internal strengths and
weaknesses. This would be well suited to extremely dynamic environments where
there is rapid change going on.
typology has many similarities to the previous paranoid typology where there is
great emphasis on control of the organization and surveillance of the
environment. A leader with this type of behavior will tend to be stubborn and
frustrated with his/her subordinates because of his/her inner need to pursue
perfection. This behavior is often a characteristic of many high achievers in
Compulsive people are
usually perfectionists and take great care and diligence in their own work to
the point of being very slow to complete tasks. As a manager of others he/she
will have great difficulty in delegating work. To maintain control, they will
develop many rules, procedures and policies to keep a check on their
subordinates work. The firm’s preoccupation with planning, budgets, procedures,
rules and action plans will greatly influence how the company is internally
organized and how the environment is seen and interpreted. Strategy will also
be crafted taking into account the firm’s existing rules and procedure
structure, limiting its own strategy options.
Productivity will be
sacrificed for perfection of work. Obsessive-compulsive people also expect
perfection from others and become very frustrated when people don’t live up to
their standards and expectations. In extreme situations this leads to get
mistrust of coworkers and subordinates, leading to the loss of respect and
falling out of relationships. This is generally part of a wider inability to
develop and carry on relationships with people because of their feeling that
socializing is wasting time.
Strategy is usually
developed and implemented with a very clear concrete objective and underlying
and uncompromising philosophy which serves as the organization’s reason for
being. This philosophy based on the founder’s sense of ethics will remain
steadfast within the company’s mission and strategy, even at the cost of
exploiting some potential opportunities arising during the life of the company.
Strategy will tend to be based more on this philosophy than what is happening
in the competitive environment.
Success is often
jeopardized with to the reluctance to commit the necessary resources in the
implementation phase. The obsessive-compulsive organization will tend to hoard
and hang on to resources, being reluctant to use them.
The entrepreneur who
started the firm will in most cases also manage the firm during the growth and
maturity stages. A person may find it very difficult to release control and
delegate power and authority. Where compulsiveness and centralized decision
making worked well in the early stages, this style of management in later
stages of development becomes an obstacle to firm creativity and innovation.
This form of positional status can increase the power-distance relationships in
the organization. Formal
controls and organizational hierarchy creates a very static and stable internal
environment. Formal authority is through position in the hierarchy rather than
experience. This status and dominance over subordinates is clearly shown in
these types of organizations.
behavior in organizations may tend to be a defense mechanism against some form
of anxiety or fear, in a similar way to the paranoia typology.
Obsessive-compulsive people hold the belief that some form of calamity will
happen if action is not taken to prevent it. To them this means that work must
be completed to the upmost highest standards possible. This scenario is often
reinforced by organizational stories about a previous major problem that
occurred because the firm was not adequately prepared. In times of great
uncertainty this typology can lead to organizational breakdown.
typology is useful during entrepreneurial start ups, in very stable
environments and repetitive manufacturing operations, etc. However the resulting
organizational form created out of this typology will become very rigid because
of the core philosophy and the high number of controls in place. If controls
become too excessive, organizational motivation, creativity and innovation will
decline. This will hinder the organization from identifying and exploiting new
opportunities. However in a moderate form the organization will have a well
integrated check and balance system and focused product strategy. When new
products/opportunities are discovered, the underlying need of producing
perfection will make the development process very slow.
(dramatic) typology is manifested when a person is hyperactive, impulsive and
dramatically venturesome in their lives. They work tirelessly to impress
others, often appearing flamboyant, craving novelty and excitement. Attention
seeking people base their actions on hunches and intuition, without any formal
analysis before making decisions. An organization within the attention-seeking
(dramatic) typology will have very centralized decision and command structures.
The attention-seeking leader sees the primary role the organization is to carry
out his/her bold and dramatic ideas thought out by the leader.
(dramatic) leaders are usually great charmers of people they want to impress.
They continually seek positive feedback and admiration of their actions. They
are very opinionated on topical issues, but lack substance to support their
ideas and will change their position to suit their audience. They have very low
self-esteem and rely on others to suppress this. Being at the centre of
attention relieves this tension and the insecurity they feel. Consequently it
is hard to get along with these people unless one helps to fulfill this craving
for attention. These leaders tend to surround themselves with people who will
always agree with them.
Decision making is
unreflective and borders on the impulsive. The larger and more complex the
organization grows, the more opportunity for dramatic events and less time
there is for the leader to focus on detail in the decisions he/she makes on
behalf of the organization. Decisions tend to be made on the potential to gain
attention rather than any factual analysis. Narcissistic behavior also can
occur, where bullying, manipulation and deception become tools of control and
domination. Subordinates usually see through the insincerity and become
de-motivated, uninspired, skeptical, and stop giving creative suggestions to
the leader. This uncreative environment is reinforced by the way managerial
posts are filled through politics and nepotism. Those who have real influence
are those who are favoured by the leader. The leader sees employees only as
tools to implement his/her grand plans. The views of subordinates are rarely
taken into account for major decisions.
Strategy is based on the
general craving for visibility and exposure. Consequently strategy often
diverges from previously set goals and objectives because other circumstances
have created opportunities where attention can be quickly gained. As a
consequence, strategy becomes very disjointed and ad hoc. Organizational structure is hap-hazard and does not take
account for the needs of the environment. The structure is developed with the
need of the leader to control decision making. It is not uncommon for the
leader to meddle in even the most mundane decisions and give out assignments
that are very difficult to satisfy. Short term advantages are sort at the cost
of long term gains for the organization. Resources are used very inefficiently.
Attention-seeking (dramatic) organizations may borrow heavily and become highly
(dramatic) people my start projects with great enthusiasm, as it seemed a good
idea at the time, but very quickly loses interest. The general motivation
behind what they do is to gain notoriety and attention rather than create
something of long term substance. This trait may be very valuable in start ups
in high profile industries like entertainment where there are no shortages of
examples. However this form of strategy can be disastrous in a mature
organization, where new strategy will be inconsistent, with an unnecessary high
risk with rash expansion.
The depressive typology
is characterized by a feeling of hopelessness, inaction, passiveness, low
confidence and conservatism. There is a feeling that there is little control of
the outside environment and even if they intervened there is little chance of
success, so the best option is to carry on as usual and not be proactive.
In a depressive state
cognitive information coming in will become distorted resulting in a stream of
negative thoughts. Beck (1967) suggests that people who themselves are
depressed will develop a cognitive schema that organizes incoming information
in a negative way. Things about self, the world and the future will be subject
to overgeneralization distortions
which will create negative outlooks into matters of competency, ability, luck,
fate and potential outcomes, etc. Other cognitive distortions (Beck 1976) like arbitrary inferences (jumping to
negative conclusions about everything), personalizing
(assuming everything is one’s own fault), and castastrophizing (thinking the worst case scenario about
everything) will also distort incoming information, leading to the feeling of
being a total failure, where a self fulfilling prophecy develops.
Within the organizational
context, there will not be much interest in anything, leading to a number of
stifling consequences such as failure to replace assets, little, if any new
product development, little market intelligence gathering, poor customer
service and leader indecisiveness. There is a basic pessimistic outlook towards
the outside environment. The organization will tend to be very bureaucratic and
hierarchical, the same it has been for decades before (if it is an established
company). Managers will not take any initiative and leave major decisions for
the board and committees to make. The company operates through procedures with
little impact from happenings in the marketplace. This brings complacency which
brings strong barriers to any form of change.
Strategy tends to develop
from within, rather than from the market as managers feel they already
understand the market well enough and there is little point doing any further
field analysis. The competition is seen as being the same and customers are
homogenous as far as managers are concerned. Too much field analysis could
bring uncertainty, shock and anxiety about the need to change which is what the
organization is trying to avoid.
This typology is common
in very established firms in stable market environments where technology in
production processes have been already automated. Examples of these types of
industries would include the steel, automotive (prior to the 1980s),
agriculture and some industrial chemical industries. Industries that have been
protected through tariffs and formed oligopolies would be very susceptible to
depression. Because these industries have been stable for many years,
environmental change is very difficult to see from inside the industry,
something like the goldfish not being
able to see the water it is swimming in. In an organization with a moderate
form of pessimism, one would expect a high degree of management involvement in
strategy formation, resulting in firm focus. However where complacency has
developed, anarchistic strategies and stagnation in a declining market would be
When firms become
pessimistic bringing on complacency, this leaves them open to takeover by
stronger and more ambitious competitors. For example, CEMEX the Mexican cement
giant took the opportunity to takeover cement companies in South-East Asia
during the 1997-1999 Asian financial crisis, where many firms became very
pessimistic. Novel strategies in very stable markets can shake complacent
competition. Singapore Airlines left IATA and shook up competition by providing
better in-flight service in the 1970s. Existing TV networks were caught
off-guard when CNN launched its 24 hour news network in 1980.
The schizoid typology is
relatively rare in new enterprises as someone in this state would be unlikely
to develop an enterprise unless it is of solitary nature, like graphic design
or computer programming. The world to the schizoid is unhappy, unpleasant and empty
of meaning. Nothing really excites the schizoid who tries to remain detached
from everything. Sometimes schizoid tendencies carry an eccentric nature or
beliefs with them such as belief in the supernatural, UFOs or conspiracy
theories, etc. In private life the schizoid person is greatly devoid of
personal relationships except for parents and closest relatives. He/she would
have very few friends as they are seen as intrusive and a waste of time. For
these reasons the person lives a very sheltered life, where any social support
network will not likely exist.
Under the schizoid
typology, any leadership in an organization would appear directionless, always
changing and confused, indifferent to praise and criticism, and seemingly
detached from the reality of what is going on. The leader would appear to be in
a world of fantasy or daydreams. Deep down this state would be caused by
anxiety or fear of being attached to intimacy from either the feeling self
conscious, worthless and at the same time superior to others (Stone 1993).
Firms in the schizoid
state would carry out very little environmental scanning. There is no firm
philosophy to follow, resulting in undisciplined and uncoordinated
product/market strategy. Little direction would come from the leader who will
tend to be withdrawn, indecisive or uncommitted. It is likely that the leader
will not even have any close advisors to fill in his/her apathetic void. Such a
company would tend to pay little, if any attention to criticism and complaints
by customers, stakeholders and authorities. Due to this underlying apathy there
is great risk that strategies developed will operate with little regard to
rules and regulations. If these breaches are serious and the company is caught
out, it could lead to heavy consequences.
Company strategy and
operations will just continually muddle along unless one or more groups within
the organization takeover and dominate the decision making process, e.g.,
marketing, finance or operations departments. There may be a struggle between
two or more groups within the company, where demarcation lines with will be
created with an “us and them”
mentality. If this occurs then the organization will become a political
battleground, resulting in little collaboration. These barriers between departments
would lead to very little flow of information around the organization.
If conflict is managed
within the organization this could promote many different points of view.
However this may be difficult if political competitiveness destroys any potential
cooperation. Most strategy and operational decisions will be very inconsistent
because they are based on political processes. The organization will lack the
strength in the top leadership to steer it all subordinates in the same
direction and overcome the climate of suspicion and non-cooperation.
Narcissistic behavior can
occur from extreme behaviors within the paranoid, obsessive-compulsive and the
attention-seeking (Dramatic) typologies or it can occur as a psychological
response to the need to manage self-esteem. Narcissistic individuals have a strong
need to be admired, a sense of self importance and a lack of insight and
empathy into the needs and feelings of others. They see themselves as great
achievers, even if they haven’t achieved anything, which can lead to an
overconfidence bias. They seek to associate themselves with those who have been
successful to seek more acclaim through the association. Narcissists find it
very difficult to cope with their own emotions, particularly when their self
view comes under scrutiny. For this reason they find it very difficult to learn
from others, are poor listeners and don’t teach, but indoctrinate their
Narcissists are highly
ambitious people. They are attracted to business and driven by their need for
power and glory. This is a trait of many successful entrepreneurs, where self
confidence and ambition assisted them. The dream of success and the accolades
it brings is something they think about a lot. Some narcissists are truly
experts in their field and they will extend their knowledge and skills into
other areas. Where narcissists have little intellectual knowledge in their
field, they will think very shallow, but at the same time they will be very ‘street-smart’.
Narcissists expect a lot
from their subordinates. When they don’t receive the total devotion and
dedication they expect of their subordinates, they will punish them in
Machiavellian ways. The narcissist is highly distrustful and overly exploitive
of his/her subordinates. However he/she is extremely sensitive to criticism and
will very quickly grow into childlike deep anger and rages if they are not
given the respect they think they deserve.
Strategy will be
underlined with a great desire to compete and win at any costs. This drive to
win can be positive but at the extreme, devious methods will be employed which
can border on the unethical and illegal. In extreme narcissism, objectives can
be unrealistic as they are based on fantasy. This results in grandiose
strategies objectives which are impossible to achieve (Brown, 1997, P. 648).
The arrogant nature of the narcissist will lead to intuitive decisions where
little analysis and interpretation of the market is undertaken (Brown &
Starkey 2000). The narcissist likes to think in terms of the big picture and
leave details to his/her few trusted loyalists who tend to tell their leader
what he/she wants to hear. The narcissist wants to leave a legacy and be ready
for a fight. However he/she will always look for potential enemies along the
horizon. There is a reluctance to change strategy even when it is not working
as the narcissist views this as a sign of weakness and failure. This weakness
can lead to large scale disasters.
Table 3.21. Six
psychotic typologies, characteristics, associated thoughts and beliefs.
Associated Thoughts & Beliefs
People influenced by this typology will;
Be distrustful of others,
Misinterpret social events
Harbor resentment towards
Is prone to envy and
Is argumentative, hostile
“People are all out to get me” “We
must get others before they get us”
“All people have ulterior motives and cannot be trusted”
“People say one thing but do another”
“Don’t let people get away with anything”
“I have to be on my guard all the time”
“People are only friendly because they want something”
Be preoccupied with order,
Seek perfection in what
Have little time for
friends and holidays,
Usually be miserly and
Be rigid and stubborn.
“Rules and high standards keep order”
“Other people are reckless and irresponsible in their work”
“If don’t look into the details there may be possible flaws”
“My way is the right way to do things”
“It is not worth doing something unless it is done perfectly”
“I must not waste any time on frivolous things that interfere with
“I can only depend on myself”
Engage in excessive
attention seeking activities,
Exhibit excessive emotions,
Have shallow opinions,
Have a strong need for
Be very political,
Machiavellian in their decision making.
“I am in charge of everything”
“People are here to work for me”
“High profile actions promote my image”
“Politics, manipulation and deception are ways of achieving ends”
“I get by on my hunches without really having to think about things”
“It feels good to be at the centre of things”
“The world is a stage – dramatic acts lead to greatness”
“Look at me, aren’t I great”
“I can impress and entertain anybody because I’m an exciting person”
“Boredom is the worst feeling”
“If I can do it – just do it”
Tend to give up or not even
Believe they are not
capable of achievement,
See their position as
Tend to give up if problems
“I am likely to fail”
“The world is against me”
“If anything will go wrong, it will”
“Why bother trying”
“Everything is my fault”
“We cannot beat the competition”
Be detached from personal
Be indifferent to opinion,
Have very little pleasure
Be socially inept,
Be very passive and uncommitted
when events are occurring, and
Prefer to work alone.
“I hate being around and tied up with other people”
“I like my privacy and not being close to others”
“Its best not to confide in others”
“Relationships are always difficult and end up badly”
“I am best working on my own”
“I don’t need an intimate relationship”
Need to be admired,
Have a strong sense of self
Have a lack of insight into
other people’s needs and feelings,
Have a sense of
Have a sense of
Have a strong but very
fragile self-esteem, and
Be envious of others.
“I very special and deserve VIP treatment”
“Rules don’t apply to me” “I look after No. 1”
“If others don’t give me the praise and recognition I deserve, they
should be punished”
“Who are you to criticize me?”
The firm will become
self-absorbed and seek to capitalize on opportunities that show greatness. These
are very inward looking (Christensen & Cheney 2000), where stakeholder
interests are rarely considered, often leaving them to drop off support. Self
rhetoric can become so intense an echo of unrealistic dreams and grand schemes,
that in telling himself who he is and what he stands for, that he will forget
who he is and what he stands for (Hatch & Schultz 2002).
The typologies above have
some influence in how the world is perceived. Structure, management style and
strategy reflect or mirror how the leader and members of the organization see
the world. This is heavily influenced by the leader at the top (Mitroff 1984),
especially if the leader was also the founder of the organization. Although
organizations can be seen as a psychotic phenomenon, very little research has
been undertaken on this aspect of misalignment to date. The psychotic continuum
is a worthy paradigm through which to view organizational opportunity,
strategy, operations, and decision making, potentially capable of assisting in
diagnosing the causes of organization dysfunction.
Murray Hunter is associate professor at the University Malaysia Perlis, and consultant to Asian governments on community development and village biotechnology. Murray is the inventor/author of a number of chemistry patents in Australia and as a researcher was the first to report many new natural compounds in international journals like the prestigious Journal of Essential Oil Research.
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 The continuum
from normal to any type of psychotic behavior should be seen in steps and
degrees, rather than in any absolute terms.
are very complex and most psychological profiling methods measure them simply
missing much of the depth of a personality. Thus personalities really cannot be
accurately understood through a 5 or 7 point scale, etc, as a personality is
made up of thousands of traits or attributes which vary in influence according
to time of day, mood and situational occurrences. What even makes personality
more difficult to understand is that a person’s ‘self-view’ may be very
different to what they portray to the world, i.e., an attention seeker shows
grandiosity but may have a very low self-esteem. Our general surface
observation of a person can only see what that person wants us to see and what
they want to be, rather than whom they are.
power-distance relationship was a concept developed by Gerard Hendrik Hofstede
to describe how people in the lower part of the organization accept power from
higher up the organisation hierarchy. In the case of an obsessive-compulsive
organization it would be expected that the power-distance relationship to be
high where relationships would be very autocratic. See: Hofstede, G. H.,
(2001). Culture’s Consequences: Comparing values, behaviors, institutions, and
organizations across nations, 2nd Ed., Thousand Oaks, CA., Sage Publications.