Why Smart Leaders Run Their Organizations With Dignity

For a brief period in the 1980s, “Chainsaw” Al Dunlap was hailed as a corporate folk hero for shutting factories and firing thousands of workers. In reality, he was doing little more than juicing the numbers in the short term to earn hefty bonuses. The SEC later sued him for fraud and he has earned fame as one of the worst CEOs ever.

Yet the myth of the “tough guy” CEO never lost its luster. Ego-driven leaders like Eddie Lampert at Sears and Travis Kalanick at Uber not only terrorized employees, but did lasting damage to their organizations. Cruel policies, such as stack ranking, continue to attract a following even though they’ve long been discredited.

The 18th century philosopher Immanuel Kant believed strongly in the notion of dignity, which he defined as treating people as ends in themselves, rather than as means to an end. I’ve found that Kant’s ideas about dignity are helpful for leading an organization—no one wants to be a cog in someone else’s machine. Treat them like one and it’s bound to cost you.

How Elon Musk Broke Twitter

After buying Twitter, Elon Musk sent an email entitled “A Fork in the Road.” “Going forward,” he wrote, “to build a breakthrough Twitter 2.0 and succeed in an increasingly competitive world, we will need to be extremely hardcore. This will mean working long hours at high intensity. Only exceptional performance will constitute a passing grade.”

What followed would have made “Chainsaw” Al Dunlap proud. He told employees that those that did not reply by 5pm the next day would be dismissed with three months of severance. He then ruthlessly cut 80% of Twitter’s staff, apparently even firing janitors, which forced employees to bring their own toilet paper.

Many cheered his ruthless cost-cutting, but it soon became clear that the moves undermined, rather than improved, performance. Without content moderators enforcing trust and safety guidelines, hate speech proliferated and usage on the platform declined by 30%. Advertisers balked and analysts estimate that Twitter lost 80% of its value.

Don’t get me wrong. To be effective, leaders have to make tough calls. High achieving firms often have competitive environments. Sometimes costs need to be cut. I’ve fired plenty of people in my career—at one point as many as 150 people in a single day. But you can still treat people with respect and dignity. That doesn’t cost a single penny.

In the case of Twitter, the employees, for their part, seemed to do okay in the end. The majority of them went to other tech competitors who, given the competitive market for tech talent, were likely happy to have them. Unemployment in Silicon Valley remains below 4%.

The Economics Of Adverse Selection

Why did Musk’s efforts go so awry? Shouldn’t leaders expect and demand high performance? Certainly, coddling employees is no way to get the best out of them. Yet there is a simple economic principle called adverse selection that explains why Musk’s email was bound to backfire and undermine the performance of Twitter.

When Musk took over, he had no way of knowing which employees were top performers and which were just getting by. His email, demanding employees commit to being “extremely hardcore” and work “long hours at high intensity,” was meant to weed out laggards. But it ignored a critical reality: employees knew their own value better than he did.

The most in-demand workers—those with the strongest skills and best reputations—had options. Some were already planning to leave and you can imagine them chuckling when they saw Musk’s email. Others were considering offers and Musk’s email put them over the edge. But some were stuck, with nowhere else to go.

Inadvertently, Musk was selecting for that last group, the ones who other firms weren’t trying to hire, the least talented, least liked of the bunch. Those most in demand knew that they can always go elsewhere, where they will be treated with dignity.

Transformation Theater And The Identity Trap

There’s no doubt that Elon Musk is a brilliant entrepreneur—you don’t become the world’s richest man by accident. So why would he do something as objectively foolish as sending that email? Or, for that matter, stage a bizarre stunt like walking into Twitter’s offices carrying a sink? Simple: he was boosting his own status at the expense of Twitter’s employees.

This is how transformation theater so often derails real change. Leaders manufacture urgency, rush strategy, and seek publicity—not to drive meaningful transformation, but to center themselves in the narrative. These theatrics make success less likely, but that’s beside the point. The real goal is to signal their own status and identity.

Notice what was missing from Musk’s letter. There was no vision of what Twitter should become. No roadmap for how employees could grow, contribute, or elevate their own sense of identity and status. That’s because Musk clearly didn’t care about any of those things. Twitter is far less successful today than when he bought it.

This is the identity trap that so many leaders fall prey to. If we’re not careful, signaling our identity can become more important than the underlying idea itself. Sure, Musk lost billions, but he made his point. He showed that he is a true “master of the universe,” who could do whatever he wants however he wants to do it.

Unfortunately for Musk, history is not on his side. Things didn’t turn out well for “Chainsaw Al,” Eddie Lampert, Travis Kalanik or so many others with similar hubris that came before him. It is, of course, possible that he somehow defies the odds, but I wouldn’t bet on it. The universe has a way of settling the score.

Accounting For What You Don’t See

In Seeing Around Corners, Columbia Business School’s Rita McGrath emphasizes how important it is for leaders to get more visibility at the edges. When you’re at the center, you are insulated in ways you’re not aware of and there are going to be things that you don’t see.

A striking example of these blind spots occured when Portuguese colonists first came across manioc in South America. They were perplexed by the elaborate, multi-day process the indigenous people followed to prepare it. Some steps, like boiling the raw tuber to eliminate its bitterness and prevent digestive issues, appeared practical. Others seemed superstitious.

What the Portuguese didn’t realize was that they were seeing survivors—those who had inherited generations of hard-won knowledge about manioc’s dangers. As it turns out, manioc, if not properly processed, has low levels of cyanide, which accumulate over time and cause chronic poisoning. Those who ignored these traditions had died out.

When the Portuguese streamlined the process to gain efficiency, they slowly poisoned entire populations, which is a great metaphor for what happens when leaders fail to treat people with dignity. Just like the Portuguese ignored generations of knowledge, leaders who dismiss long-standing institutional wisdom often pay a heavy price. They cut themselves off from crucial channels of information. Eventually that catches up to you.

Linus’s law states, “given enough eyeballs, all bugs are shallow.” But the opposite is also true. Without enough eyeballs, all dangers are potentially lethal. That’s why it’s so important to treat people with dignity. When you empower those around you, they are that much more capable of delivering the performance you need to compete.

Greg Satell is Co-Founder of ChangeOS, a transformation & change advisory, an international keynote speaker, host of the Changemaker Mindset podcast, bestselling author of Cascades: How to Create a Movement that Drives Transformational Change and Mapping Innovation, as well as over 50 articles in Harvard Business Review. You can learn more about Greg on his website, GregSatell.com, follow him on Twitter @DigitalTonto, his YouTube Channel and connect on LinkedIn.