It's Not Always the Leader's Fault: How Informed Followers Can Undermine Efficient Leadership

TL;DR

This paper examines how followers' information accuracy influences leadership efficiency, showing that imprecise information can lead to optimal coordination, while accurate information may cause inefficiencies or failure to coordinate.

Contribution

It introduces an informational model demonstrating how followers' knowledge quality affects leadership outcomes and highlights conditions under which leadership is effective or undermined.

Findings

Imprecise follower information leads to efficient coordination.

Accurate follower information can cause leaders to fail in guiding the team.

Leadership efficiency depends on the informational accuracy of followers.

Abstract

Coordination facilitation and efficient decision-making are two essential components of successful leadership. In this paper, we take an informational approach and investigate how followers' information impacts coordination and efficient leadership in a model featuring a leader and a team of followers. We show that efficiency is achieved as the unique rationalizable outcome of the game when followers possess sufficiently imprecise information. In contrast, if followers have accurate information, the leader may fail to coordinate them toward the desired outcome or even take an inefficient action herself. We discuss the implications of the results for the role of leaders in the context of financial fragility and crises.