Study Rates Business Leaders in Context of the Economy

A leadership study of decision making that preceded the past decade's recession has produced useful results for Bruce Blaylock, professor of management in Radford University's College of Business and Economics (COBE).

Blaylock and Charles Falk, retired dean of the Northern Illinois University College of Business, formulated an instrument, the H Factor, by which they assessed the decision making of some of the economic slump's key leaders.

Titled "The H Factor: A Behavioral Explanation of Leadership Failures in the 2007–2009 Financial Meltdown," the paper will be published in the spring 2012 edition of the Journal of Leadership, Accountability and Ethics. Published semiannually for specialists, practitioners and students, the journal advances business and management knowledge and features articles by business leaders, policy analysts and researchers.

Blaylock and Falk chose to include the three positive characteristics of honesty, humility and honor and the three negative characteristics of hubris, hypocrisy and hostility in defining the H Factor matrix.  High-profile leaders in the banking, mortgage lending, investment and other industries were then graded on the presence or absence of these six characteristics as Blaylock and Falk reconstructed the decision making that led to the failure of financial institutions, the loss of personal wealth and the blow to the U.S. economy

"It was infuriating when we looked at the poor decision making of those who put us into this situation," Blaylock said. "Some leaders threw away decades of information on individual borrowing behavior for the opportunity to make more money, while others wisely chose not to. Why?"

After analyses of speeches, industry trade articles and the events leading up to the recession, Blaylock and Falk suggested "that the current problems with the financial system and our economy have many of their roots in an area not discussed in the literature: leadership, or more precisely, the failures of leadership in a number of different but highly interrelated spheres."

Among those scoring positively in the H Factor matrix were John Allison, retired president of BB&T, and Patricia Woertz, chief executive of Archer Daniels Midland. Executives of Lehman Brothers, Bear Stearns, Freddie Mac and Fannie Mae were among those identified by Blaylock and Falk's study as having failed.

"While it is subjective, this framework is a useful way to think of our leaders, no matter the organization," Blaylock said. He encouraged executives and managers to analyze themselves using the H Factor as a way of understanding the motivations driving the policies they set. "Understanding these traits and to what degree we as leaders exhibit them can help us make good decisions and avoid the bad decisions, " he said.