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Profitability

SALT LAKE CITY, 26 April 2011 -

Leadership development firm Zenger Folkman recently studied the correlation between great leadership and profitability and the behaviors that separate great leaders from their average or poor counterparts.

The result:

  • Poor leaders lose money

  • Good leaders make money

  • Great leaders double profitability

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“The key factor differentiating great leaders from their average or poor counterparts is the possession of profound strengths,” said Joe Folkman, president of Zenger Folkman and leader of the study of managers. “One hundred percent of the ‘great’ leaders had several profound strengths in the 90th percentile.”

...“poor” leaders lost on average $1.2 million in revenue per office managed...

In contrast, 100 percent of the leaders in the “poor” category had two or more fatal flaws. A fatal flaw is not just a weakness; it is a competency at the 10th percentile. These fatal flaws completely impair leaders who posses them.

“Strengths-based leadership teaches that a leader must not focus on their weaknesses but rather their strengths,” Folkman said. “However, if a leader possesses a fatal flaw, they will struggle to progress and will need to focus their development efforts on improving it.”

A leader’s effectiveness directly influences an organization’s profitability. In a case study of a large financial services firm, Zenger Folkman found that “poor” leaders lost on average $1.2 million in revenue per office managed while the “great” leaders generated $4.5 million.

“The level of engaged and satisfied employees is directly correlated with the satisfaction of customers, which in turn impacts profitability,” Folkman said. “In our study, the worst leaders only had 11 percent of their employees who were highly committed, while the best leaders had 57 percent commitment. The conclusion was obvious: Great leaders are able to keep their highest performing employees, positively impacting productivity.”

It’s important to note that the “great” leaders studied had developed a set of highly effective skills that led to their success, but they did not necessarily need to be great at every competency.

Zenger Folkman

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