RESULTS

CEO Leadership and Management Behavior

Using direct report and subordinate observations only (no self scores) measures of CEO leadership/management behavior (total N = 621), we discovered a series of significant partial correlations between those measures and Net Sales, Net Profit, Return on Investment (ROI), Annual Sales Increase and Five Year Profit Change. See Tables 1 and 2. We also found a number of significant interactions (frequency x quality) between CEO behavior and the financial performance of the organization. See Table 3.

TABLE 1

Significant Partial Correlations of CEO Behavior & Organizational Financial Performance

Controlled: Business Marketing Area, Business Age, Current Development Phase, Industry, CEO’s Desired Development Phase

Companies with higher reported Net Sales, Net Profits, and higher rates of Return on Investment (ROI), had CEOs who scored higher on Vision, Ethics, Human Resource Management, Leadership Stature, Quality of Delegation, and Quality of Organization, etc. See Figures 2-7. We also discovered that CEOs frequently scored themselves higher both in frequency and quality of the behavior than did their direct reports and subordinates. Examples are Adaptability, Delegating, Employee Development, Motivating Others, Listening, and Leadership Stature. See Figures 8 & 9.

Management Team

We found that team adaptability had a significant partial correlation (controlling for business age, current development phase, industry, marketing area, and desired development phase) of .13, p< .05 with current company profit. In addition we also discovered that Adaptability, External Communication, Innovation and Performance Monitoring all had significant partial correlations with return on investment (ROI). See Figure 10.

Management teams in organizations with above-average levels of profit reported significantly higher levels of team Structure, Morale, Performance Monitoring, Innovation, Coordination, and Adaptability. See Figure 11. However, when we controlled for Industry, Business Age, Marketing Area, and Phase of Development we did not find these same factors to have significant partial correlations with profit. We did not find any significant correlates of management team behavior with organizational profit. Unlike our other findings this result may represent a Type One Error and should be interpreted with caution. We also did not find any relationship with five year profit change.

TABLE 2

Significant Partial Correlations of CEO Behavior & Organizational Financial Performance

Controlled: Business Marketing Area, Business Age, Current Development Phase, Industry, CEO’s Desired Development Phase

Organizational Culture

We identified a series of significant relationships between frequency of behaviors in organizational culture and company financial performance. Certain factors such as Customer Satisfaction, Downward Communication, Job Design, Performance Facilitation and Work Group Performance had significant partial correlations with company profit at a p<.001 level or higher with other reasonable factors influencing profit controlled for (industry, company age, current phase of organizational development, marketing area).

TABLE 3

Significant Partial Correlations of CEO Behavior & Organizational Financial Performance

Controlled: Business Marketing Area, Business Age, Current Development Phase, Industry, CEO’s Desired Development Phase

 

 

Many of the same factors positively correlated with profit of the organization were negatively correlated with annual sales increase. Thus, the quicker the growth, the lower the

level of many key factors associated with organizational profit (Table 4). We also found that organizations with higher levels of net sales, net profits, and return on investment, had significantly higher levels of most of these same behaviors (See Figures 12-14).

TABLE 4

Significant Partial Correlations of Organizational Culture and Financial Performance

Controlled: Business Marketing Area, Business Age, Development Phase, Industry, CEO’s Desired Development Phase

Correlations Across The Three Surveys

We found that the measurement scales correlated across the three surveys. Thus, CEOs with higher levels of leadership/management behavior (frequency and quality) had correspondingly higher levels of management team functioning and organizational culture. This finding is robust due to the fact that in most cases we used different rater pools for each of the surveys. Also, except for the CEO, all raters were blind to the collection of financial data and any link of the data to the organization’s financial performance (Table 5).

TABLE 5
Examples of Correlations Across Surveys

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Last Updated 1/15/97 by Geoff Goldman & Dennis Valencia

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