Saturday, September 25, 2010

Leadership and Organizational Performance...Lack of Linkage...


So imagine my surprise last week as I started my Doctorate of Education program at Wharton and the UPenn Graduate School of Education when the creator of the Executive Program in Work-Based Learning Leadership, Dr. Doug Lynch, stated that there is a lack of academic research linking leadership to organizational performance. As a lifelong learner, I was curious about this statement, so I started looking at what research is there and was amazed…

It is a common belief…maybe in this case an assumption…that effective leadership is key to organizations. Think of any number of great organizations like GE, Cisco, Google, etc. and you immediately think of great leaders. Yet, the research can’t make a connection. Most research has focused on the different leadership paradigms like differences of visionary and transactional leadership styles in organizations. For example, it has always been believed that visionary leaders played a larger role in organizations than transactional leaders…but because of research limitations the findings are not clear. One study by Fenwick Feng Jing and Gayle C. Avery of Macquarie University in Australia titled “Missing Links in Understanding the Relationship between Leadership and Organizational Performance” states the following:

“No clear picture has emerged about the relationship between leadership and organizational performance. Despite increased research into the leadership-performance relationship, many problems and gaps remain in existing studies. There is a lack of integration concerning the relationship between leadership and performance, a narrow set of variables has been used in previous studies, and context and levels have been ignored. Therefore, there is a need for clarification.

Another key challenge in linking leadership to organizational performance is the issue of performance measures itself. The same study by Jing and Avery states:

“One problem relates to the quality of performance measurement. When selecting the measurements of performance, previous researchers have employed either financial measurements or non-financial measurements, rather than employing both kinds of measures in order to enhance the validity of the research. They have neglected the interrelationship between financial performance and customer satisfaction and employee satisfaction. This provides a narrow measurement of performance that may not have appropriately evaluated the sought-after performance effects appropriately. Thus, both financial measurements and non-financial measurements of performance are essential in order to enhance research validity.”

The implications to the profession of Human Capital Management (HCM) and development are significant. If there is no academic research to directly correlate leadership styles to organizational performance, then there can be no linkage of leadership development programs to organizational performance. According to Bersin and associates 2009 High-Impact Leadership Development study, it assesses that leadership development is a $9.5 billion industry. That is a ton of cash to be spending on something and not know whether it is having the intended impact on the organization.
Of course, many organizations make use of anecdotal evidence that leadership development is having the intended impact. One private sector organization uses the number of new $1 billion businesses generated by action learning projects (ALP) during its leadership development programs. But as Bradley Hall states in his book “The New Human Capital Strategy,” our focus should not be on world-class leadership development programs, but world-class leadership capabilities. Because leadership capabilities should be driving organizational performance as we have seen…Even as I lead my organizations leadership development capabilities, I can’t tell you whether organizational performance is improving or even changing! Again…lots of assumptions and anecdotal evidence is being used across the HCM space in many respects.

I think it is important to understand the relationship, or in this case the potential lack of a relationship between leadership and organizational performance. Our organizations, and in particular, HCM leaders and their organizations should be engaging with the academic community to enable research that helps understand what we assume as a linkage between leadership and organizational performance. If we are unable to understand the linkage and the role that leadership development most obviously plays in our organizations…then we can’t leverage it to its full potential.

Nuff Said…


Twitter: JKeithDunbar
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  1. Keith-

    Interesting questions and observations about leadership and organizations. I am sure we all have worked with, for or heard of 'good' leaders. Some would say they have something special or natural. Others are rote leaders with a checklist. What is the measure of leadership? Results--desired outcomes in a given time frame.

    One of my favorite quotes:

    The best executive is the one who has sense enough to pick good men to do what he wants done, and self-restraint to keep from meddling with them while they do it.
    Theodore Roosevelt

    The challenge is how much self-restraint? When is the job-mission-outcome communicated and understood by those who have to carry out the orders? That is where measuring falls short. Chiefly because leadership is not a recipe that has equal application to boardroom or battlefield.

    What measurement is the loss of life, but mission objective met? How many millions gained or lost in company value makes or breaks it? Who's value system is applied? For there is no universal level of leadership. One day Ghandi, the next Patton.

    I am getting out of this web that you are working at the PhD level and wish you luck and leave you with a final quote;

    A leader is a dealer in hope.
    Napoleon Bonaparte

    Another intangible.

    Semper Fi

  2. Michael Zack at Northeastern University has done some phenomenal research that ties knowledge management to org performance to financial performance. I realize its different from leadership, but it might be an interesting/valuable comparison? starting point?

  3. The good news is that there has been lots of research over the last couple of years that show that companies that invest in their people perform better in the market. Human capital research