The Impact of Leadership on Business Outcomes

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Joe Folkman

Guest post by Joe Folkman

Have you ever been part of an organization where things were proceeding smoothly, where goals were achieved, people were busy and the organization was doing well? Then, a new leader came and everything suddenly changed for the better. The energy level of employees went up substantially, pride in the organization increased, the effort and dedication of individuals jumped, bold objectives were enthusiastically accepted and even greater results were achieved. The differences were not only measurable by the accountants, but everyone could feel it.

Perhaps you had the opposite experience where things were things were going along smoothly and a new leader was introduced and things quickly began to fall apart. High performers quit, conflicts became more apparent, work seemed much less important and there was no fun. Colleagues skulked into corners, not wanting to be engaged. Overall satisfaction decreased. Grousing and carping criticism of the leaders became rampant. People receiving promotions were chosen because of politics, not performance. Management decisions felt arbitrary and unfair. Results began to slide, and employees became the cause of the problems as much as the economy or market conditions. Key employees were laid off while the remaining people were asked to carry a bigger load. Results continued to decline, and your job felt increasingly harder and you found yourself beginning to think about quitting.

Those who have experienced great leadership or poor leadership have felt the difference. Could these changes have been predicted? Are there clear correlations between the effectiveness of a leader and the success of an organization?

Case Study on the Impact of Leadership on Customer Satisfaction
A large telecommunication company was focused on an effort to improve customer satisfaction ratings. The company wanted to know which factors impacted the customer satisfaction. A group of 81 leaders received 360 feedback from their immediate managers, peers, direct reports and others. The leadership effectiveness of each manager was evaluated by a 49 item assessment. Based on the overall rating from the 49 items, managers were divided into five groups, from leaders at the bottom 10th percentile (the worst leaders) to those at the top 10% (the best leaders).

First the satisfaction of sales representatives was measured. Data showed the worst leaders led sales representatives at the 29th percentile while the best leaders had their team at the 81st percentile.

The next measure was intention of sales representatives to quit the company. Having a sale representative quit had a significant impact of the satisfaction of customers. New sales representatives did not understand the customer needs or their requirements. Once again, the effectiveness a leader showed a substantial trend with the best leaders only having 12% or their sales representatives that thought about quitting, while the worst leaders had 45%.

Finally, customer satisfaction was measured. The worst leaders had customer satisfaction ratings at the 36th percentile while the best leader’s customers were at the 60th percentile.

Leadership Effectiveness Rating Bottom 10 Percentile 11th – 35th 36th – 65th 66th – 90th Top 10 Percentile

Employee Satisfaction/


29 47 64 69 81

Intention to Leave the organization

45% 36% 23% 22% 12%

Customer Satisfaction Ratings

36 46 49 57 60

It was concluded that overall customer satisfaction was strongly influenced by two intervening component factors:

  • Employee engagement/satisfaction
  • Employee retention

Leaders do make a significant influence in organizations. Organizations that can select, train, and develop great leaders will have a competitive advantage over their competition.

Joe Folkman is the co-founder and President of Zenger Folkman, a leadership development firm focused on building strengths of individuals, teams, and organizations. Joe is a co-author of the recent Harvard Business Review article “Making Yourself Indispensable.” To learn more leadership tips from Joe, subscribe to his leadership blog or follow him on Twitter: @zengerfolkman.

Other Guest Blog Posts: One factor at a time (OFAT) Versus Factorial DesignsDeming and Performance AppraisalThe Achilles’ Heel of AgileDr. Deming’s 15th Point

6 thoughts on “The Impact of Leadership on Business Outcomes

  1. This is a wonderful of the necessary ability to handle complexity and have the ability to offer value to employees that is needed. With the first change CEO performance improved, they had the cognitive skills and the planning capacity to develop long term and were truly able to “fill the bucket” as Elliot Jaques would say. The second CEO is a classic example of promoted beyond competence and the tell tale signs that this person was too small for the bucket.

  2. Joe,

    I like the way you have a used a research study to make the links between leadership, employee engagement,and customer satisfaction. Did this study also show the key differences between the worst and best leaders? Essentially what I’m aking is what made the biggest difference on employee engagement?


  3. Hi Joe

    Your study on customer statisfaction reinforce a study done on loyayty (the book the Loyalty Effect). It surprises me how many executives and managers do not get the point that unless you can get your team happy and loyal, your customers won’t be happy or loyal.

    We need more of these messages.


  4. I’m a bit ‘iffy’ about ‘leadership’ if its cast in what Mintzberg calls the ‘heroic’ mould. It concieves organisations as power relationships, rather than a set of interlocking ‘communities of intent’ where people seek to work together, respecting each other as people, to serve their customers. It’s odd that in great democracies we have a work culture that accepts totalitarian authority structures!

    I’d encourage reference to articles on leadership by Henry Mintzberg at

  5. David I agree that there is a big danger in viewing heroic leadership as desirable.
    This is a comment I made on Leadership Bit by Bit, yesterday
    I think the super hero leader bias comes from our desire for magic silver bullets. Many don’t want to know that the main thing that separates them from admirable leaders is perseverance. It isn’t magic, it is putting in the work to take every small step on the journey.

    Mintzberg is one the few (maybe 10) authors I think every manager should definitely read.

  6. Pingback: The “Scary HR” Carnival of HR - Blogging4Jobs HR, Recruiting, Social Media Policies, Human Resources, HR Technology Blogging4Jobs

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