How grief at work impacts CEOs (and their management forecasts)

CEOs who experience grief following the death of a close work colleague are more likely to make more pessimistic management forecasts for up to one year later

Grief is universal. Yet, even after more than two years of a global pandemic, death and loss remain taboo in the world of work. For managers and senior leaders, the process of supporting employees through grief might be one of the more challenging personal tasks they will face in the workplace. But what happens when leaders themselves experience grief at work; does grief affect the way business leaders make decisions? If so, what are the economic consequences? And what support do leaders and their employees need to better manage grief?

The death of a colleague can heighten CEOs‘ awareness of death, and even change the way they make business decisions, according to the findings of a recent research paper. Death is a law: Death of former colleagues and management forecasts examines how the loss of a former colleague affects a CEO’s management forecasts and voluntary disclosures about the future financial position of the company that is shared with shareholders and market participants.

One of the key findings of the study is CEOs who experience the death of a close colleague make more pessimistic, or negatively biased, management forecasts for up to one year later. According to one of the study’s authors, Leye (Leonard) Li, Senior Lecturer in the School of Accounting, Audit & Tax at UNSW Business School, the closer the CEO is to the deceased (maybe they had worked together for a long time, were of similar age, or shared several key similarities) the more pessimistic their management forecasts become – which has direct implications for the business, its employees, and society more broadly.

The impact of grief on management forecasts

The study finds grieving CEOs who recently lost a work colleague are much more likely to be pessimistic in their management forecasts. They also exhibit more pessimistic tones in speech during conference calls. Some CEOs, however, might be better equipped to handle their grief, with older CEOs, or people who have already experienced a similar death event before, issuing less pessimistic forecasts about the company's performance. CEOs with a larger social network are also less likely to issue pessimistic forecasts compared to those with smaller social networks.

“We find that older CEOs (who have a higher possibility of experiencing their parents’ death already), CEOs that has experienced similar death events before in our sample period, and CEOs with larger network size are less likely to be affected. In total, those are the CEOs who have more life experiences in coping with such emotional shocks,” says Dr Li.

Read more: How did COVID really impact the mental health of CEOs?

The effect seems to last one year, but beyond that, CEOs seem to make a staged recovery. “Prior studies in psychology suggest grief from a colleague’s death can be intense but short-lived. We have found in the literature that, in the early stages, affected individuals often exhibit severe emotions, including stress, distress and emotional exhaustion,” he says.

“But over time, individuals recover from their bereavement. During recovery, intense emotional responses to the death gradually dissolve. In the case of forecasting behaviours, we find that bereaved managers tend to recover in about one year’s time, which means their forecast bias diminishes after one year,” he says.

It is worth noting, however, that due to disproportionally more male CEOs than female CEOs, over 95 per cent of the death events in the study’s sample affected male CEOs.

The economic implications of grief at work

The study’s findings suggest there are broader economic consequences of grief in society. ”Grief is widespread in society. While the press, social media and government reports often urge firms to formulate effective strategies for employees to cope with grief, our study suggests that the economic consequences of grief are not just a private matter. 

"Rather, the impact of a colleague’s death spreads beyond CEOs’ emotions to their firms’ management forecasts,” explains Dr Li. As such, senior leaders should recognise the possibility that forecasts made by grieving counterparts could be negatively biased, and conduct extra checks and make adjustments as a result. And businesses more broadly have an economic, as well as a moral imperative, to offer more support to employees dealing with grief.

While the findings show that managers’ forecasting performances are affected by their personal life experiences, all employees will, at one point or another, be affected by their emotions at work. Knowing this, companies can do more to offer support to people through universal experiences like grief. Similarly, the study debunks a prevailing myth that senior leaders are ‘superhumans’ who don’t let emotions get in the way of work. Even CEOs, it seems, are affected by personal emotions at work.

Read more: Lucinda Brogden: how leaders can improve workplace mental health

How to support employees through grief

While the study examined the experience of CEOs, Dr Li says the findings can also apply to other employees within the firms’ financial planning and analysis divisions. “As the development of management forecasts requires intensive coordination of financial planning and analysis employees to process information, the quality of their work is also likely to be impaired if the employees are exposed to the deaths of their friends or relatives,” he says.

But given the universality of grief, perhaps the same could be true for almost everyone in any given organisation – which Dr Li suggests could mitigate the effects of unresolved grief by offering psychological supporting services to employees of all levels.

“Our study is particularly relevant to the current environment when some of us lost our loved ones during the pandemic,” says Dr Li. “Our findings enforce that organisations must pay attention to the mental health of employees who lost their loved ones.”

Dr Leye (Leonard) Li is a Senior Lecturer in the School of Accounting, Audit & Tax at UNSW Business School. For more information, please contact Dr Li directly.