Sunday, May 15, 2016

Donald Trump: The Ineffectual Leader

This was an old paper I wrote during October 2013. The prompt was to identify somebody and assess whether or not they are an effective leader, applying an article or two from Harvard Business Review’s 10 Must Reads in Leadership. I decided to write about Donald Trump because he has pulled some outrageous stunts in business decisions that you can’t even dream of reading on The Onion. 

I suddenly remembered that I wrote about it, and thought it would be relevant given, well, that he actually has a serious shot at the presidency. Seriously, that’s freaking terrifying.

The son of a middle-class real estate developer, Donald Trump has been an enduring media figure and eccentric celebrity infamous for many stunts. He began has real estate career in his father’s company, Elizabeth Trump and Son, while still a student at the Wharton School of Business in the University of Pennsylvania. Trump’s faced existential challenges in the early 1990s to the amount of $3.5 billion in corporate debt.[1] In 1991, he filed for Chapter 11 bankruptcy protection for the Trump Taj Mahal, accumulating $900 million in personal debt in the process.[2] Another bankruptcy followed the next year with the Trump Plaza Hotel.[3]            

Evidently, Trump’s career had mixed results. Although he was able to substantially reduce these debts by 1994, he declared two additional corporate bankruptcies: once in 2004 with Trump Hotels and Casinos, and again in 2009 with Trump Entertainment.[4] Overall, he’s had a number of business failures in 17 years.[5] Despite this, Trump has a net worth of around $3 billion and has had several successful ventures.[6]

Does Trump display the impressive capabilities showcased by Level 5 Leadership outlined by Jim Collins or the Strategist described by Rooke and Torbert? The answer is no on all counts: Donald Trump, by any definition, is not a particularly effective leader.

Collins identifies Level 5 Leaders as those who incorporate “personal humility” with “professional will.” Even if Donald Trump may have some degree of professional will, his ego is extremely large even when compared to other successful entrepreneurs. Trump often credits himself with his perceived successes. The (auto)biography featured on his website waxes poetic about his achievements, comically calling him “the very definition of the American success story” and “the archetypal businessman.”[7] He has written many books trumpeting his personal achievements. During his potential presidential run in 2011, Trump boasted that he was a superior businessman and possessed higher net worth than Mitt Romney, going as far as calling the former CEO of Bain “basically a small business guy.”[8]  When business soured, Trump did not hesitate to immediately externalize the blame. During the real estate downturn in the 1990s, when he defaulted on loans made to him, he “figured it was the bank’s problem, not mine [that they lost money on him].”[9] In the 2009 collapse of the Trump Ocean Resort Baja Mexico, Trump immediately insulated himself by saying that he was merely a spokesman and declined any financial responsibility. In the bankruptcy of Trump Entertainment Resorts the same year, Trump emphasized that he was a chief executive not involved in day-to-day operations.[10] Consequently, despite several temporary spurts, Trump has not been able to achieve what Level 5 Leaders can: consistently high growth and returns in his businesses.

Rooke and Tobert define a Strategist as one who “exercises the power of mutual inquiry, vigilance, and vulnerability” to “generate organizational and personal transformations.” However, when measuring Donald Trump among the seven types of leaders, he is best classified as an opportunist. He is highly self-oriented and believes most strongly in winning, finding creditors and investors expendable people to be “crushed” and to “take the benefits.”[11]

Innumerous examples abound of Trump throwing others under the bus for selfish personal gain. In 2007, Trump halted the construction of Trump Tower Tampa, a 52-story condo building. No buyer was refunded for the $200,000 to $1.2 million in deposits made. In fact, initial sales went so smoothly that deposits were returned in order to charge even higher prices.[12] In 2008, when Deutsche Bank demanded $40 million of the $640 million used to finance Chicago Trump Tower, Trump decided to sue the bank for $3 billion, essentially demanding a yearly interest of negative 1,250 percent.[13] When the bank noted in court that Trump has had many prior instances of overdue debt, he filed another suit for defamation. Eventually, Deutsche Bank dropped the case, indicating a willingness to lose $40 million rather than remain associated with Trump. In 2009, after collecting $32 million from investors, the Trump Ocean Resort Baja collapsed. It informed the investors that construction will be canceled; however, the contract stipulated that the company was still allowed to use the deposits anyway.[14] Trump even said that the investors were “lucky” because they would have lost more money had the Resort actually been built.[15]  In 2011, while attempting to develop a golf course in Scotland, Trump first applied for planning permission on land he didn’t own, and, when that failed, tried to force a couple out of their 20-year home by fencing off their entire house without their permission and then sending them a $4,000 bill for his work.[16]

Meanwhile, Trump’s leadership style and treatment of subordinates are best exemplified when he issues verdicts at the end of episodes on The Apprentice. Everyone who judges with him always agrees with his decision without fail: his highly self-centered personality inevitably results in groupthink, where even those with differing opinions would not want to be seen as undermining him and subsequently fired.

Although Trump will likely continue making profitable real estate ventures, his deficiencies as a leader are clear. His enormous ego and predatory behaviors sap his potential as a leader and prevents his businesses from achieving inspirational success.

[1] Claire O’Connor, 4th Time’s A Charm: How Donald Trump Made Bankruptcy Work for Him, Forbes, Apr. 21, 2011
[2] Id.
[3] Id.
[4] Id.
[5] Markus Allen, Donald Trump Bankruptcy: The Truth about Trump and His Failures,, Apr. 22, 2011
[6] Claire O’Connor, 4th Time’s A Charm: How Donald Trump Made Bankruptcy Work for Him, Forbes, Apr. 21, 2011
[7] Donald J. Trump Biography,
[8] Michael Falcone, Donald Trump Says His Huge Net Worth Makes Him Qualified to Run For President, ABC News, Apr. 18, 2011
[9] Floyd Norris, Trump Sees Act of God in Recession, New York Times, Dec. 4, 2008
[10] Id.
[11] Id.
[12] Alex Frangos, Stalled Condo Projects Tarnish Trump’s Name, Wall Street Journal, Nov. 16, 2007
[13] Floyd Norris, Trump Sees Act of God in Recession, New York Times, Dec. 4, 2008
[14] Howard Kurtz, The Trump Backlash, Newsweek, Apr. 24, 2011
[15] Id.
[16] Victoria Ward, Donald Trump Angers Neighbor After Erecting New Boundary Fence and Then Billing Him, The Telegraph, Jun. 4, 2011

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