Making the bottom line your top priority may not be the best way to improve profitability. That’s the conclusion of recent research conducted by Mary Sully de Luque and Nathan T. Washburn of Thunderbird School of Global Management; David A. Waldman, of Arizona State University West; and Robert J. House, of the University of Pennsylvania, that underscores the risk of single-mindedly pursuing profit.
This finding is based on survey data gathered from 520 business organizations in 17 countries designed to test if a CEO’s primary focus on profit maximization resulted in employees developing negative feelings toward the organization. The result? Employees in these companies tend to perceive the CEO as autocratic and focused on the short term, and they report being somewhat less willing to sacrifice for the company. Corporate performance is poorer as a result.
But when the CEO makes it a priority to balance the concerns of customers, employees, and the community while also taking environmental impact into account, employees perceive him or her as visionary and participatory. And they report being more willing to exert extra effort, and corporate results improve.
These results aren’t surprising. When the definition of leadership focuses only on profit what tends to fall by the wayside is the condition of the human organization. Leaders wrongly believe that they can’t focus on both at the same time.
Nothing could be further from the truth. As this research points out, organizations perform best when they balance financial goals with respect, care, and fairness for the well-being of everyone involved.
The Four Keys to Better Leadership
In looking at all of the great organizations that The Ken Blanchard Companies has worked with over the years, we have found one thing that sets these organizations apart from average organizations. The defining characteristic is leaders who maintain an equal focus on both results and people. In these organizations, leaders measure their success with people (customers and employees) as much as they measure their financial performance.
In these organizations, leaders do four things well.
- They set their sights on the right target and vision. Great organizations focus on three bottom lines instead of just one. In addition to financial success, leaders at great organizations know that measuring their success with people–both customers and employees–is just as important as measuring the success of their financial bottom line. In these organizations, developing loyal customers and engaged employees are considered equal to good financial performance. Leaders at these companies know that in order to succeed they must create a motivating environment for employees, which results in better customer service, which leads to higher profits.
- They treat their customers right. To keep your customers today, you can’t be content just to satisfy them. Instead, you have to create raving fans–customers who are so excited about the way you treat them that they want to tell everyone about you. Companies that create raving fans routinely do the unexpected on behalf of their customers, and then enjoy the growth generated by customers bragging about them to prospective clients.
- They treat their people right. Without committed and empowered employees, you can never provide good service. You can’t treat your people poorly and expect them to treat your customers well. Treating your people right begins with good performance planning that gets things going in the right direction by letting direct reports know what they will be held accountable for–goals–and what good behavior looks like–performance standards. It continues with managers who provide the right amount of direction and support that each individual employee needs in order to achieve those goals and performance standards.
- They turn the organizational chart upside down. The most effective leaders realize that leadership is not about them and that they are only as good as the people they lead. These leaders seek to be serving leaders instead of self-serving leaders. In this model, once a vision has been set, leaders move themselves to the bottom of the hierarchy, acting as a cheerleader, supporter, and encourager to the people who report to them.
The way to maximize your results as a leader is to have high expectations for both results and relationships. If leaders take care of the people who take care of their customers, profits and financial strength will follow. The result is an organization where people and profits both grow and thrive.