Can Extraordinary Leaders Double Profits?

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Is there really a connection between leadership and increased profits? The answer is YES!

In recent work by Jack Zenger, Joe Folkman and Scott K. Edinger they found that decoding leadership revealed patterns that can be used to develop leaders that inspire and motivate employees to higher levels of productivity and deliver profits as a result. As a matter of fact, extraordinary leaders can double profits.

So what is the connection between leadership and the bottom line?

Zenger, Folkman and Edinger through their study, found a growing body of research supporting the conclusion that leaders, good and bad directly affect the bottom line of companies. Analyzing a database of 300,000 360 degree feedback reports on approximately 30,000 managers collected in hundreds of companies around the world revealed concrete performance metrics that allowed them to compare measurable business results with leadership effectiveness. This data reveals how to identify extraordinary leaders and how to develop leaders.

A leadership study for a commercial bank revealed that poor leaders represent 10% of the management and lost the bank money; good leaders represent 80% of the management and made a profit and the bank's extraordinary leaders more than doubled profits in comparison to the other 90 percent. During the period studied poor leaders (10%) in the study lost 1.2 million dollars; good leaders' (80%) results provided net income of 1.2 million dollars; while the extraordinary leaders (10%) produced net income of 4.5 million dollars.

While extraordinary leaders don't double profits in every case, it is proven that good leaders create more economic value than poor leaders and extraordinary leaders create significantly more economic value as compared to the rest.

What factors have the most powerful impact on the ability of a leader to perform at the level of extraordinary? Measurement of a leader's impact on the bottom line reveals focus on the factors of employee retention and turnover; employee commitment and morale; customer satisfaction; and productivity. Because these factors can be objectively measured, the trend lines throughout the studies reveal these same factors every time.

Developing Extraordinary Leaders Organizations of any size can capitalize on the research by following a business development model that focuses on leadership development that defines the competencies that will make a difference as show by the best companies. The studies reveal a clear path to extraordinary leadership, increased productivity and more profits. This path is to build and develop your company's leadership on 16 competencies and strengths. These 16 competencies can be divided into 5 categories of behavior, as outlined below:

  • Focus on results.
    • Drives For Results,
    • Establishes Stretch Goals
    • Takes Initiative
  • Leading change.
    • Develops strategic perspectives,
    • Champions change
    • Connects the group to the outside world
  • Character.
    • Displays high integrity and honesty
  • Interpersonal skills.
    • Communicates powerfully and proficiently,
    • Inspires and motivates others to high performance
    • Builds relationships
    • Develops others
    • Collaborates and teamwork
  • Personal capability.
    • Demonstrates technical professional expertise
    • Solves problems and analyzes issues
    • Innovates
    • Practices self-development

These 16 competencies were most frequently and consistently those that separated the extraordinary leaders from the rest. While not all leaders will possess all the above traits, most extraordinary leaders will possess strengths in at least 3 or 4 competencies.

One Most Important Competency The one pivotal competency that distinguishes the extraordinary (10%) leaders was interpersonal skills behaviors. These leaders do their jobs well but also inspire and motivate their people to succeed. And the process is simple; develop leaders in your company with the competencies that support the behavior of inspiring and motivating people.

Empirical analysis in the study revealed that some of the traditional methods of motivating where less effective than applying use of competency companion behaviors which were not often intuitive. For example:

  • Setting stretch goals for employees.
  • Establishing a clear vision.
  • Developing others.
  • Practicing greater teamwork collaboration.
  • Demonstrating greater initiative.
  • Being a role model.

Developing leaders in your company with these competency companions and developing a system for follow-up, accountability and practicing new skills are critical for your company's leadership success and key to doubling your profits.

It is possible to measure leadership in dollars. Good leaders create value and extraordinary leaders create far more value that good leaders. Wisely choose to develop yourself and the leaders in your company.

If you want to learn more about this topic or how to apply these competencies in your company, call ThistleSea Business Development, LLC at 724.935.1930.

Adapted from: CLO Magazine, How extraordinary leaders double profits, by Jack Zenger, Joe Folkman and Scott K. Edinger, July 2009

By: John D. Laslavic, LPBC Business Coach/President ThistleSea Business Development, LLC

© 2009, ThistleSea Business Development, All Rights Reserved