How Does Leadership Structure Affect the Bottom Line?

Key findings from Cornell ILR Associate Professor Chris Collins and University of Arizona Assistant Professor Elizabeth McClean.

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KEY FINDING 1: Investing in high-commitment HR practices improves competitive advantage.

High-commitment HR (HCHR) practices show an investment in employees and enhancing workers’ skills. These practices have been found to improve competitiveness and performance in the areas of productivity, service and product quality, bottom line and turnover.

Examples of HCHR practices:

  • Emphasizing employee movement and promotion within the company
  • Attracting and hiring employees based on fit with organization culture and values
  • Providing training and development as well as learning and growth opportunities
  • Compensating based on performance
  • Encouraging high levels of employee participation
  • Allowing job autonomy
  • Using developmentally-oriented performance appraisals

KEY FINDING 2: Higher employee human capital and motivation are resources that lead to competitive advantage

In this study, human capital is defined as the “collective experience and knowledge of the workforce, specifically years of experience and education.” And though HCHR practices have been seen to increase employees’ human capital, which motivates employees to willingly collaborate and help one another, employee experience is a significant indicator of performance. “The top 25% of companies with employee collaboration showed significantly higher levels of sales growth compared to companies in lower quartile of collaboration—on average, companies in the top quartile of employee collaboration had sales growth at more than twice the rate of companies that were in the bottom quartile of employee collaboration.”

KEY FINDING 3: Experienced leaders make a difference

“CEOs with more industry and firm experience seem to know how to better take advantage of the employee-based resources of collaboration, helping and employee experience to drive higher firm performance.”

IMPLICATIONS FOR LARGE ORGANIZATIONS

The survey consisted of data gathered from 234 small companies with a range of 100-250 employees. The researchers believe the findings are applicable to middle level managers who “set the business/competitive strategy for the unit and look to align their employee-based resources to drive competitive advantage in their particular market environments,” so they expect to see “similar relationships” demonstrated in business units.

Read the full report from CAHRS.

Collins and McClean. How Does Leadership Structure Affect the Bottom Line. January 2017.

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