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Performance Management

Published August 2005

A Contingent Approach to Leadership Effectiveness

 

  Patrick Kulesa

Companies compete in a variety of ways. Some organizations, such as financial services firms, stress customer service and the ability to deliver that service efficiently. Other companies, such as pharmaceuticals, must continually innovate in their product lines to maintain healthy profitability. Still others, such as many manufacturers, stress product quality to maintain their edge in the marketplace.

Regardless of its specific strategic priority, an organization's leaders are critical to the execution of the business model. Leaders position the company for success by articulating strategy, mission, vision and values. Effective leaders also communicate the company's position to secure employee buy-in and maximum effort. Moreover, the best leaders practice what they preach. They show respect to their employees by involving them in decisions and taking their opinions to heart. They role-model the kinds of behaviors expected of employees at all levels of the organization, and they provide energy to the enterprise by streamlining bureaucracies, setting clear priorities and encouraging employees to give their best.

But are the necessary leadership behaviors universal, or are they contingent on the strategic priorities of the business? Research by ISR supports the contingent perspective—namely, that effective leadership looks different depending on the business goals of the organization.

The research evidence supporting this contingency perspective is derived from two different sources. Surveys of representative samples of employees from 10 nations, totaling 9,123 respondents, constitute one source. Respondents indicated which of five strategic priorities is the main focus of their organization: company image, customer service, efficiency, innovation, or quality products and services. In addition, respondents rated their organization as currently successful or unsuccessful at achieving this priority. Other survey questions examined the opinions of employees across a wide range of leadership topics. Comparisons by priority between companies viewed as successful versus unsuccessful point to the attributes of leadership required to succeed under various strategic mandates.

A second data source is derived from ISR's studies of many of the world's best financially performing organizations, as determined by above-industry-average financial performance on net profit margin and return on invested capital. Data from 31 companies and more than 350,000 employees are included in the research.

High-performing organizations judged by their employees to be especially effective at each of the five strategic priorities are compared with other high-performing companies on the same leadership topics included in the 10-nation study. The aspects of leadership that most distinguish high-performing companies that excel under each priority provide a second source of empirical support for a contingency perspective.

Organizations that stress service to the customer or the strength of their image in the marketplace require a leadership cadre effective at inspiring people. Organizations that compete on the quality of their products and services require leaders to encourage their people by respecting their input, showing trust and role-modeling desired behaviors. Companies that effectively compete on efficiency of operations provide strong supports to their people in the form of well-designed workplaces with clear priorities and streamlined bureaucracies. Finally, leaders in companies that compete successfully on innovation both inspire and encourage their people through a clear sense of vision and by providing trust, respect and regular communication. (See Figure 1.)