Kids Company, a leading UK charity for disadvantaged children, collapsed a year ago amid allegations of gross financial mismanagement.

Camila Batmanghelidjh, its flamboyant founder and chief executive, had been elevated to such heights that she was left unchallenged for many years, not only by her staff, donors and board of trustees, but also by the government and media.

From the charity’s launch in 1996, government ministers approved payments to it totaling £42m (see pdf) in the form of grants. Ms Batmanghelidjh’s charisma, charm and fame led to her being so idealised that she avoided normal levels of scrutiny applied to most organizations.

A House of Commons select committee concluded that Ms Batmanghelidjh’s personality “appeared to captivate some of the most senior political figures in the land”, and high-level political patronage may have deterred whistleblowers from coming forward.

Kids Company provides an extreme example of the dynamics and potential consequences of “idealisation”, but these are in play at most organisations to a greater or lesser extent, and not just at the top — individual subordinates can also be put on a pedestal.

It may be difficult to spot potentially dangerous hero worship because it can often be disguised as the everyday respect and admiration we endow on apparently outstanding leaders.

Such adoration is a mutual relationship with distortion on both sides, where a person’s need for admiration is fuelled by the need of admirers to see their leader as exceptional. Such admirers often have dependent personalities whose craving for emotional security blurs their perceptions of a leader’s limits and capabilities.

Manfred Kets de Vries, psychoanalyst and professor at Insead Business School, says: “It’s a totally reinforcing dance in which, because of a general feeling of helplessness, you idealise the leader and say quickly what the leader likes and wants to hear, and that reinforces the leader’s narcissism and vice versa. Unfortunately, the moment the leader accepts this, he is surrounded by liars.”

Heaping such admiration and trust on people in power helps sustain a fantasy that those who look after us are all-knowing, or believing that being close to great people helps us feel better about ourselves. For many, it is a way to compensate for a difficult relationship with early authority figures, usually a parent.

Children normally imagine their parents as benevolent, all-knowing figures, and this helps cushion them against overwhelming fears of life’s dangers. With maturity, however, individuals learn to accept their parents’ flaws, and thereby to tolerate a world of uncertainties and disappointments and to rely on their own opinions rather than always accepting those of authority.

Glorifying a leader can leave him or her free to act irresponsibly, unethically or to the organization’s detriment. It also means subordinates are unlikely to question decisions or assert their own talents and insights, which can in turn damage a company’s innovative potential and development.

Devaluation is the inevitable downside to idealisation — the higher the person is put on a pedestal, the greater the crash, as Ms Batmanghelidjh discovered. Rather than being seen as merely flawed, her fall from grace was total, and much of the work she and her staff had accomplished was forgotten.

All leaders have a degree of narcissism and therefore are at risk of encouraging this dynamic, but those on the extreme end of the continuum are more likely to be seduced by its allure. The more narcissistic the leader, the greater his or her need to attain admiration and the security he or she craves.

Kerry Sulkowicz, psychoanalyst and managing principal of New York’s Boswell Group, a consultancy specialising in work relationships, says: “The danger is believing in one’s infallibility once one reaches the top. Sometimes leaders do things deliberately, or more likely unconsciously, that promote idealisation.

“They act as if they have all the answers or don’t show any vulnerability, and for those people who are susceptible to this it can lead to an idealisation of them.”

New chief executives can feel pressure to be perfect from the start, and experienced ones can believe they have seen and done it all before, says Mr Sulkowicz.

The danger is when they start to act the part. Another risk factor is when the distance between a CEO and his or her staff becomes too great and as a consequence feedback diminishes.

Mr Sulkowicz believes prevention is better than cure in this regard. “Leaders who are getting nothing but positive feedback from their organisations should actually worry about that — they should be alert to the likelihood that nothing but praise is a sign of idealisation and they should really look for criticism because otherwise they’re likely to believe it themselves and are being set up for a fall.

“It should raise a red flag when the exclusive praise comes from the directors, because the board’s role is in evaluating the performance of the CEO, and if the board can’t see through the idealisation then that’s really dangerous.”

He explains how he relied on admiration from his clients to compensate for the lack of love and security from his parents. By making himself invaluable to his clients he convinced them of his omniscience.

“I would position myself with a magic wand able to transform any performance issue. The more they needed me, the more I could trust they would take care of my needs, financial and emotional.

“The price was compromising the clear, honest counsel needed to be an effective consultant.”

Mr Sulkowicz believes that the prevalence of celebrity culture adds to the problem because business leaders can fall prey to its allure — they may then start believing in their own mythology.

“When a CEO starts to be treated as a Kim Kardashian figure, famous for being famous, it detracts from their credibility and authority as leader.”

His compulsion to appear perfect left him dependent on his chief for reassurance and security, while the CEO in turn grew dependent on his impeccable performance. Although it appeared to be a smooth-running company, the cost of sustaining a perfect image left them both risk-averse.

“I came to realize that what I created in order to feel safe was actually limiting my ability to move forward with my career,” he says.