We’ve always been passionate about leadership and the difference it makes in the world. Leadership was the focus of our university studies 30 years ago. We’ve consulted, coached, trained and implemented almost everything that can be done to make leadership better. But in all the work we’ve done, we’ve never been able to show how leadership impacted shareholder value. In the past, we convinced executives to work on leadership because it was the right thing to do, and assumed it would make a difference to the company. The Art of Leadership, by Max DePree, embraces and promotes this philosophy of leadership. But this and other theoretical leadership approaches are too ambiguous for many executives to seriously consider investing scarce time and resources. Why should investments be made in leadership development without the probability of creating a great team or increasing shareholder value?
We’ve launched a new company called ExecutiveScience that approaches executive leadership development from the opposite end of the spectrum – as a science as opposed to an art. Leadership research and quantitative analysis have evolved and become interconnected to provide a reliable process and a clear pathway forward. We can now measure leadership development and its impact on value. Rather than just believing that this is a good thing to do, we can actually verify how it makes the business more successful.
Great leadership first of all creates economic value for shareholders. A Deloitte study, The Leadership Premium, ranked “Senior Leadership Team Effectiveness” second (behind financial results) as the most important of nine criteria that analysts use to judge a company’s success. Effective leadership had a 16% premium on share price while ineffective leadership had a 20% discount. Zenger Folkman’s empirical research found that the above-mentioned financial results can likewise be attributed to leadership – “poor leaders lose money; good leaders make profit; extraordinary leaders more than double profits in comparison to the other 90%!”
Great leadership also creates human value first and foremost for members of the organization who invest their time, talents and energy in making the organization successful. It extends to customers who acquire products and services and to partners and suppliers who also are connected to the company’s fortunes.
Finally, great leadership has enduring value. An organization’s success also leverages individuals who shape and mold societies and culture. Highly successful organizations help states and countries better control the present and both predict and create their future.
But great leadership doesn’t just happen. It is readily developed when leadership has been simplified, it can be quantified and it is integrated into real-time business challenges. When that happens, great leadership creates and dramatically increases economic, human and enduring value by bringing science to leadership development.