08 November 2011

The leadership difference: why effective leadership pays and how

Those recruiters who attended the RCSA International Conference in Port Douglas a few months ago, were fortunate enough to witness Steve Vamos speak on the last afternoon. Given Steve’s background in technology companies, you would be forgiven for expecting that his presentation would be hi-tech in format and tech-heavy in content.

In fact it was neither. Steve spoke without any slides and he spoke about the importance of values and leadership in building a company that produces quality products and services, is enjoyable to work for and is profitable. He was jargon-free, passionate and compelling.

One of Steve’s public positions is as President of the Society for Knowledge Economics which last month published a fascinating study into Australian workplaces, Leadership, Culture and Management Practices of High Performing Workplaces in Australia: The High Performing Workplaces Index. Funded by the Department of Education, Employment and Workplace Relations (DEEWR), the research was carried out by the Australian School of Business, ANU, Copenhagen Business School and Macquarie University.

The research involved interviewing 5,661 employees from 77 Australian organisations to understand what separated high performing workplaces (HPWs) from low performing workplaces (LPWs) and what financial difference having a high performance workplace provided. After a full analysis was undertaken 12 organisations were classified as HPWs and 13 organisations were classified as LPWs.

Comprehensive comparisons were then made between the two groups to identify how much financial difference there was between these two groups and what this difference was attributed to.

Here’s an edited summary of the results:


Financial Performance
  • LPWs have an average profit margin ratio of 5.44% whilst HPWs have an average profit margin of 15.63%. In other words, the profit margins of HPWs are nearly three times higher than LPWs.
  • HPWs are better at achieving their stated financial targets than LPWs by 34%.
Employee Experiences

Compared to LPWs HPWs have ...
  • Lower levels of employee turnover (23.3%).
  • Higher levels of job satisfaction (22.7%) and employee commitment (23.2%). Employees in HPWs are more involved with their organisation, exert extra effort in their jobs, and are more likely to tell their friends that their organisation is a great place to work.
Leadership Capabilities

Leaders in HPWs ...
  • Spend more time and effort managing their people than leaders in LPWs (29.3% higher).
  • Have clear values and ‘practice what they preach‘ (25.7% higher).
  • Give employees opportunities to lead work assignments and activities (22.9% higher).
  • Encourage employee development and learning (21.1% higher).
  • Welcome criticism and feedback as learning opportunities (20.4% higher).
  • Give increased recognition and acknowledgement to employees (19% higher).
Some key findings as to the prevailing management practices of HPWs include:

Higher levels of responsiveness to changes in stakeholder and customer networks

This is made possible by management practices such as the measurement and reporting of stakeholder relationships, interactive use of accounting controls (whereby creative thinking is encouraged and emerging opportunities in the market place are continuously spotted and debated), diagnostic use of accounting controls (whereby deviations from business plans and stated goals are continuously monitored and detected) and strategic alignment (whereby employees have a clear understanding of their individual roles and responsibilities relative to stated goals).

Higher levels of employee participation in decision making processes

This is enabled by management practices such as employee participation in strategy formulation, implementation and monitoring, employee participation in target setting and budgeting, team based work structures, cross-disciplinary and team based projects, and higher levels of employee skills utilisation. Lower levels of conflict and tension was also identified as a characteristic of HPWs.

Higher levels of behavioural and skills flexibility in employees

This is enabled by practices such as on-the-job learning, rotation of job tasks, mentoring and coaching programs, cross-training programs, high levels of learning orientation, and investment into training that helps employees do their job better.

Effective use and quality of information, communication and technology (ICT)

This is enabled by practices such as strong alignment between business and ICT strategy, and strategic and operational use of ICT.

Excellence in attracting and retaining high quality people

This relates to management practices such as talent management systems, extra efforts and resources invested into the recruitment and selection of new staff, higher wages than competitors, and employee performance evaluations.

Here’s my three point summary of the Report’s summary:
  • Effective leadership is not some touchy-feely thing that’s ‘nice’ or politically correct to do. Effective leadership produces highly significant financial benefits.
  • Nothing is more important for a leader to do than spending time with their staff and demonstrating their commitment to the development and success of their staff.
  • The financial and cultural benefits of a high performing workplace are only sustained when there is a culture of excellence in the talent management practices of the organisation.
How much time and money was devoted to leadership development in your company in the past 12 months?


What’s planned for the next 12 months?


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