Effective Leaders Share the Spotlight

Source: whodoyoulead.com

Some leaders love to bask in the spotlight, taking credit for all that goes well in their organizations.  They spend a great deal of time polishing their image and trying to make sure others recognize their successes. Others work hard to share the credit.  They are not afraid to ask for help, and then they express gratitude publicly to those who helped them achieve key goals.  We would like to believe that the latter type of leader is more effective in the long run.   A recent study, thankfully, confirms that conventional wisdom.  Research by Harvard Business School scholars Yuan Zou and Ethan Rouen demonstrates that leaders thrive when they engage and include their team members, and their firms benefit as well.  The study is particularly interesting because of its methodology.  They used earnings conference calls to evaluate CEO behavior.  Here is an excerpt from an HBS Working Knowledge profile regarding this research: 

Using transcripts from earnings conference calls held by Standard & Poor’s 1500 companies, the researchers looked for managers who turned to colleagues for input. Conference calls, the researchers say, are likely to offer insights into interactions between managers and team members that might be difficult to gauge any other way.  Combing through data that included 10,673 managers and 2,316 firms from 2010 to 2019, the researchers examined the characteristics of managers who include others, how their behavior shaped their career trajectories and team cohesion, and how promoting these managers affected companies.

Managers calling on other team members during earnings calls over the span of a year were 4.9 percent more likely to be promoted than managers who didn’t call on other team members in that same timeframe. Managers who called on multiple colleagues in a year were 11 percent more likely to be promoted than those who made no calls.  “We found that if a manager is more inclusive, that person is more likely to be promoted to CEO within the next year, and twice as likely to be promoted than the average manager in our sample,” says Zou.  Including others also boosted retention, according to the research. Employees working with a CEO willing to share credit were significantly less likely to leave the firm the following year.  The team found that female managers were 4.9 percent more likely and older managers were 0.6 percent more likely to call on colleagues than were male and younger managers.

The willingness to engage colleagues in the boardroom appears to also pay dividends in the stock market. Firms with CEOs who made a habit of calling on colleagues had higher three-day market-adjusted returns than firms with less inclusive leaders, the researchers say, providing “economically meaningful evidence that investors value inclusive CEOs.”  When a company exchanged a less inclusive CEO for one who brings others into conversations, the firm’s value increased the year after. Naming an inclusive CEO increased a company’s average three-day return by 0.8 percent. This is likely because these managers retain staff, which may result in increased operating efficiency and innovation, Zou says, and markets seem to quickly reward these trends.