Our findings strongly implicate that the levels of CEO leadership/management skill, management team functioning and organizational culture are related to the financial performance of organizations. Specific skills, such as Vision, Communication, Leadership, Delegating, and Performance Facilitation, are positively related to company performance. CEOs and management teams who rate low in these skills have lower company financial performance than CEOs and management teams who are rated high in these same areas.
Maintaining these skills as the organization grows can be challenging. The higher the rate of sales growth of the organization, the lower is the level of significant organizational culture factors that are related to profitability. Thus, the very success of growing companies creates a paradox and a significant challenge. For these companies, in order to maintain or improve their profit margins, management must focus on those behaviors that apparently also become more difficult to execute often or well as their company grows. We hope this information will assist leaders to increase their awareness of issues that are critical for the continued success of growing companies and thereby help eliminate this problem.
We also found that CEOs frequently overrate themselves on 50% of those abilities that we found are related to financial growth. Examples are Delegating, Adaptability, Leadership, and Relationship Building. These leaders may assume they need not develop further, when they are actually functioning at only an average or below average level.
Finally, our findings suggest that CEO behavior, management team behavior, and organizational culture are interrelated and dynamic. What happens in one area of the organization, affects other areas. We have attempted to show which factors influence financial performance in top-performing organizations. Although we cannot say we have found cause and effect relationships between financial performance and organizational behavior, however, we have shown that they definitely go together in time with one another and are closely interrelated.
Eggers, J. H., Leahy, K. T., & Churchill, N. C. (1994). Stages of small business growth revisited: Insights into growth path and leadership/management skills in low- and high-growth companies. Frontiers of Entrepreneurship Research. Babson College, Wellesley, MA.
Small Business Administration. (1992). The state of small business: A report of the President. United States Government Printing Office, Washington, DC.
Van Velsor, E. & Leslie, J. B. (1991). Feedback to Managers, Volume II: A Review and Comparison of Sixteen Multi-rater Feedback Instruments. Center for Creative Leadership, Greensboro, NC.
Eggers, J. H., & Leahy, K. T. (1996). Entrepreneurial Performance Indicators. Center for Creative Leadership, San Diego, CA.
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