The Business Case

The Five Practices of Exemplary Leadership®

Positively Impacts Constituents and Their Organizations
Special Report
September 2007

Evidence-Based Leadership Model

Two recent research reports offer strong empirical support for the impact of The Five Practices of Exemplary Leadership model (Kouzes & Posner, 2007). Together they show that the more we can get leaders in our organizations, at all levels, to Model the Way, Inspire a Shared Vision, Challenge the Process, Enable Others to Act, and Encourage the Heart, the better off will companies and their constituents be.

Leadership Favorably Impacts Constituent (Employee) Attitudes

When the people leading engage in The Five Practices of Exemplary Leadership their constituents significantly high levels of important employee attitudes. This is the consistent conclusion of a recent analysis involving over 66,000 survey responses completed over the past two years.

The more frequently respondents reported their leaders, across a variety of organizations, fields, and functions engaged in The Five Practices:

Model the Way
Inspire a Shared Vision
Challenge the Process
Enable Others to Act
Encourage the Heart

the more these same constituents reported experiencing:

Pride in their workplaces
Strong motivation (willingness to work hard and long hours)
Team spirit
Being productive
Trusting management
Clarity about their responsibilities

Indeed, intentions to remain with their organizations over the next year were directly related to the leadership practices of their leaders. People reported that they felt personally effective in their organizations; they felt valued and believed they were making a difference in direct proportion to the extent they experienced their leaders engaging in The Five Practices of Exemplary Leadership®.

While the previous analysis is at the individual level, consider what impact leadership has on organizational performance. This matter is taken up in the next section.

Leadership Impacts Return on Investment

In a survey involving 94 companies, Richard Roi (2006) asked executives to rate their company’s senior leadership on The Five Practices of Exemplary Leadership by completing the Leadership Practices Inventory (LPI). Then he analyzed the company’s long?term financial performance (over a 10?year period; 1996 – 2005) using net income and stock price growth. The relationship between transformational leadership practices (combining all five leadership practices into a single measure) and company financial performance was dramatic (see Table 4).

Companies with a strong and consistent application of these five leadership practices had net income growth of 841 percent versus ?49 percent for companies with a low incident of leadership practices. Similarly, stock price growth was 204 percent for strong leadership practices companies compared with only 76 percent for companies with a weak implementation of leadership practices.

Conclusion: The Five Practices of Exemplary Leadership Make a Difference

The evidence is strong, clear and consistent: The Five Practices of Exemplary Leadership make a significant difference in both favorable employee sentiments and positive company financial performance. Hundreds of other empirical studies, across a wide variety of industries and settings, support these conclusions.

For more information about these findings, contact ILA or visit TheLeadershipChallenge.com.

References:

James M. Kouzes and Posner, Barry Z. 2007. The Leadership Challenge, 4th Edition (San Francisco, CA: Jossey?Bass). Richard C. Roi. 2006. Leadership, Corporate Culture and Financial Performance. Unpublished doctoral dissertation, University of San Francisco.