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Summer 2003

New Research Defines Payback on Leadership Development

Leadership has a direct impact on the bottom line. How one leads affects the organization's ability to make a profit and return shareholder value. Missions are accomplished, goals and met and work gets done by people. Strong leaders leverage people's abilities and commitment to get work done.

Leaders in companies that generate the highest net profit margins are set apart by consistently displaying these six characteristics, according to a recent study:

• Having direction,
• Respecting others' abilities,
• Keeping other informed,
• Promoting ethical values,
• Having the energy to get past formalities and set clear plans
• Serving as a role model.

A two-pronged approach will increase the leadership capability your organization: first, select leaders purposefully and second, train them to consistently practice the six characteristics. A Hewitt Associates report reveals that among firms that are in 75th percentile or higher in total shareholder return (TSR), 100 percent use an official system to identify prospective leaders and 71 percent said that potential candidates received specialized training.

An organization's leaders impact how much employees espouse and endeavor to fulfill the firm's mission, values, and goals, says Will Werhane, International Survey Research's regional director for the Americas ISR's. A study by International Survey Research shows that staff commitment is directly correlated to how highly staff members rate their firm's leadership, and how staff members assess their nearest supervisor's people-management abilities. The more effectively leaders lead, the more effectively followers perform. Simply put, employees who respect their leaders are willing to work harder to achieve the company mission.

Strong leadership is not a "nice to have" in organizations, it's a "need to have" for organizations that want to be profitable and productive.