Leadership Crucial for Profit

A very interesting but not surprising study out of Aussie. Its important to note that higher productivity is also a result of the cultures these leaders create, the experience and customer focus that results.

Let’s hope more business leaders take note of the study including front-line managers


Leadership Crucial for Profit

High-performing workplaces are 12 per cent more productive and up to three times more profitable than their low-performing competitors, but what does it take to create this kind of success?

Well, the answer doesn’t lie in cost-cutting or bonuses.

According to a two-year study of 78 Australian companies, high performance is largely created through the quality and inclusiveness of leadership, as well as innovation.

The lead author of the study, Christina Boedker from the Australian School of Business, says the most important element in improving productivity is leadership.

“Leaders have the greatest impact on productivity and profitability – and this is at all levels,” Boedker says. “Frontline managers have the greatest impact.

“Those organisations where they create great connections with the staff and make people feel more valued are three times more productive.”

However, leaders often neglect this piece of the productivity puzzle because it seems so insubstantial compared with the tangible benefits they can see if they invest in a new IT or production system.

“What we are talking about is the need for a change in values and behaviours,” Boedker says. Good leaders are aware their employees must be treated fairly, she says.

Of the 78 organisations in the study, only 15 per cent were found to be high performing. And one thing all of those had in common was a focus on employee participation and involvement in key decision-making processes.

“This makes employees feel of value,” Boedker says.

She says people’s sense of identity and self-esteem are entwined with their work and this needs to be acknowledged by their managers. If people are having a hard time in their jobs, it is almost impossible not to take it personally.

“If people feel valued, that’s what makes them go the extra mile.”

The difference in profit margin between high and low performers averaged $8.8 million per organisation, or $40,051 per full-time employee.

The study, Leadership, Culture and Management Practices of High-Performing Workplaces in Australia, was launched last October and the project is now in its third stage, funded by the federal government.

The participating organisations are all in the services sector, which employs 85 per cent of the Australian workforce.

Boedker is now exploring whether what was learnt about the practices of high-performance companies can make a difference to five different organisations, which will be working with consultants for a year.

“We are working with companies in the low- and mid-performance categories and we are looking at what works and what doesn’t work,” Boedker says.

The researchers will put together a set of guidelines that can be used to help organisations improve their performance.

Other ingredients for the high-performance workplace include: its ability to respond to changes in its environment; effective use and quality of information, communication and technology; excellence in attracting and retaining high-quality people; and flexibility in employee behaviour and skills.