In our research we found conclusive evidence that leaders with poor leadership skills generate poor results. That finding will not come as a shock. It is quite intuitive to anyone who has worked in an organization for more than a few weeks. And our research is equally clear about the fact that good leaders tend to produce good results for their organizations.
What's more, most individuals do not need sophisticated measurement tools to tell the difference between good leaders and bad leaders. They feel the difference. They have experienced the effects at a very personal level. In general, good leaders are more effective than bad leaders in almost every dimension. Great leaders improve productivity, reduce turnover, enhance customer service, and create high levels of employee commitment.
Our research shows that there is another, even more dramatic, level of difference between good and extraordinary leaders. This was a major surprise finding of our research. Extraordinary leaders make a major difference, when compared with merely good leaders. They create even less turnover, motivate employees to perform at a much higher level, and greatly enhance customer satisfaction.
One analysis, combining results from dozens of studies, showed that for high-level jobs, the productivity difference between the top performers and the great majority is huge. Results showed that the top person is 127% more productive than the average person and infinitely more productive than the 100th person in that curve.
Our goal was to examine just how powerful an extraordinary leader's effect could be, particularly on the bottom line. In one mortgage bank, we found that "Extraordinary" leaders created profits that were nearly double those of the merely "good" leaders. In another study, organizations with excellent leaders had average stock returns nearly seven times higher than the general market.
To increase a leader's positive impact:
Focus on moving leaders from "made" to "good": Poor leaders drive customers and employees away. They lose money for their businesses. On every measurable dimension of organizational performance, good leaders outperform bad.
Don't focus on moving leaders from "good" to "slightly better": There is not much difference in outcomes between leaders ranked in the middle categories - from the 30th to the 70th percentile. Making small, incremental improvements in leadership effectiveness in this range does not seem to substantially affect organizational out- comes.
Set the goal of moving leaders from "good" to "great": Huge differences exist between top performers and average performers for all types of jobs in every outcome category. If leaders can move from the "good" level to the "extraordinary" level at a reasonable cost to the organization, the return on that investment will be substantial.