Leadership Capability - And Profitability

The connection between profits and leadership has been a missing link in most leadership research.

Recently, the Ken Blanchard Companies identified connections between leadership capacity and organizational vitality -- research that allowed Scott Blanchard and Drea Zigarmi to examine what it has dubbed the Leadership-Profit Chain.

Key findings from the research:

• Leaders who hold people accountable and ensure effective, productive behaviors in their people are the most effective influencers and drivers of organizational results.
• Equally important is a leader’s ability to affect the mood, attitude and engagement of employees and the overall culture of the organization through a specific chain of events that are implicitly linked.
• Employee passion results from the employee’s positive experience and overall satisfaction with the organization, its policies, procedures, products, and management practices, and directly predicts customer devotion and organizational vitality.
• Hard measures of employee passion include retention, absenteeism, tenure, and productivity.

Creating an organization that is successful and effective is an inside-out proposition. The quality of the culture, the quality of management practices, and the alignment of these practices with key strategic initiatives rests with leadership.

According to Blanchard and Zigarmi, leaders also hold the key to organizational vitality—the creating of an environment that allows employees to win and be passionate about what they do. By taking care of employees, leaders establish an environment in which the employees take care of the customers at a level that causes the customer to want to return year after year.

BOTTOMLINE: When managers focus their attention and emphasis only on organizational indicators of vitality such as profit, they have their eye on the scoreboard and not on the ball. Profit is a byproduct of serving the customer, which can only be achieved by serving the employee.