Leadership and Organizational Performance: A Study of Large Corporations

Abstract

Leadership influence in large complex organizations, though commonly assumed to be greatly significant, is normally not studied in terms of the variance accounted for in organizational performance. The leadership effect is viewed here as a product of an organization's environmental constraints and its leadership variance. Based on sales, earnings, and profit margin data for 167 large corporations over twenty years, we compare the impact of leadership changes with yearly, industry, and company influences. Industry and company account for far more of the variance in two performance variables than does leadership, but not for profit margins after lag effects are considered. It appears that the importance of external restrictions, and hence the maximum possible leadership influence, may range widely between specific performance criteria. The second phase of the study considers industry characteristics that appear to be associated with high and low leadership influences. These results suggest a perspective on organization performance that may be applied to the leadership influence in other large organizations and political bodies, like cities, states and nations.

Keywords

Affiliated Institutions

• University of Chicago US

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