Servant leaders are better for the bottom line

A moderate increase in servant leadership can have a significant effect on an organization’s revenue, based on new research from the School of Management.

Available online ahead of publication in Personnel Psychology, the study examined whether servant leadership — where leaders prioritize company goals and profitability, as well as the interests of stakeholders like customers, employees and communities — makes it possible to focus on multiple stakeholder groups and the degree to which an employee’s focus on others impacts their business decisions.

Using data collected from 274 employee/supervisor pairs over several months, the researchers used objective cognitive reflection scores — which measure whether individuals think through problems in detail rather than going with simple, gut decisions — and objective measures of workplace charitable giving.

The researchers were not surprised to find that exposure to servant leadership increases the degree to which employees focus on others.

“We then gave the employees a decision-making test and were able to show a relationship that we had theorized: Those who were more ‘other-oriented’ made smarter, more well-thought-out decisions,” says lead author James Lemoine, associate professor of organization and human. “Other-orientation gives you experience looking at problems from perspectives beyond your own.”

According to Lemoine, the better decision-making by those other-oriented employees resulted in more dollars to the company: a one-point increase in servant leadership scores (on a seven-point scale) resulted in $11.3 million in additional revenue for the company, about a 6% increase. And, at the same time, employees who were more other-oriented were giving more to charities.

The researchers say their findings demonstrate that positive leadership can help communities while driving financial success.

Lemoine collaborated on the study with Chad A. Hartnell, associate professor of management, Georgia State University’s Robinson College of Business; Snehal Hora, assistant professor of management, Drexel University’s LeBow College of Business; and Daniel I. Watts, doctoral student, Georgia State University’s J. Mack Robinson College of Business.