Firms whose leaders aim to serve, enjoy higher profits and employee morale

Managers who put themselves at the service of their teams, rather than the other way around, actually have a positive impact on profit, according to new research led by academics at emlyon business school. This claims to be the first research paper to find that, not only does servant leadership improve employee morale, but it also increases company profit too. The paper, published in the Journal of Business Ethics complements what was previously the general consensus on servant leadership; it’s good for people management and employee morale, but did not positively impact on company performance or profits.

The research was conducted by Vincent Giolito, Professor of Strategy at emlyon business school, alongside colleagues from the University of Illinois, the Rotterdam School of Management, Erasmus University, and the University of Auckland.

To obtain these findings, the academics collected individual data from 485 respondents based in 55 similar stores in a single company within a large metropolitan area in France – each store had one level of leadership. By reviewing the different types of leadership of managers across these stores, the academics found that servant leadership relates positively to business-unit performance measured by profit growth—a key indicator for shareholders.

In this particular setting, the average growth for the stores was negative. Yet, of the 22 stores that achieved positive profit growth, 18 had managers rated above average on servant leadership.

One company, in one large metropolitan area, was chosen to minimise any external determining factors in the study. While all stores directly report to general management, meaning the process of business-unit performance was simple, and identical across all stores.

Resolving tensions

Professor Vincent Giolito says, “There has always been the suspicion that servant leaders have better performance because they may be ‘nice’ to their teams, which could be at the company’s expense. By showing servant leadership as conducive to profit, we may help resolve a fundamental tension between employees and shareholders.”

[perfectpullquote align=”right” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Servant leadership positively impacts all financial indicators, making it beneficial for all stakeholders, and shareholders too[/perfectpullquote]

The paper argues that servant leaders are often defined by seven different behavioural dimensions; caring for each individual employee when he or she incurs setbacks in their professional or even personal life; displaying conceptual skills; empowering people, providing the employee with latitude to find their own best way to work; behaving ethically and willingly help the employee to make difficult, values-loaded decisions; putting their employees first; helping employees grow and succeed; and inviting individual followers to create value for the community, even beyond the boundaries of the organization.

Professor Giolito says, “The study highlights a fundamental and important dimension of leadership for employees – that of getting help from their managers. This dimension might be especially important for organisations for overcoming the unprecedented challenges brought about by the current crisis.”

The research also shows that the weaker the power distance orientation between leaders and their followers, the stronger the influence of servant leadership on employee flourishing. Proving that those leaders who are more approachable and less intimidating are better for companies.

These results, combined with those of prior studies showing servant leadership to be associated with a range of performance indicators, question the veracity of previous criticism. The authors claim that this investigation demonstrates that servant leadership positively impacts all financial indicators, making it beneficial for all stakeholders, and shareholders too.

Image: from The Milk Maid by Johannes Vermeer, Public Domain