Soft skills boost the bottom line

Jun 25 2010 by Brian Amble Print This Article

Far from improving financial performance, hard-driving, "results-at-all-costs" executives actually damage the bottom line because they lack strategic insight or the ability to work with and inspire others.

That's according to a new study by US organizational consulting firm, Green Peak Partners, and Cornell University's School of Industrial and Labor Relations, which argues that self-aware leaders who possess strong interpersonal skills deliver better financial performance.

"Our findings directly challenge the conventional view that 'drive for results at all costs' is the right approach. The executives most likely to deliver good bottom line results are actually self-aware leaders who are especially good at working with individuals and in teams," said Green Peak Partners's J.P. Flaum.

The study, which examined the leadership styles and track records of 72 senior executives at public, venture-backed and private-equity sponsored companies found overwhelming evidence that leaders with soft skills deliver hard results.

In contrast, bosses exhibiting typical bullying traits tended to be both incompetent and lacking in strategic intellect. Leaders who are arrogant, too direct, impatient and stubborn deliver poorer financial results and rate lower in other key areas such as business/technical acumen, inspiring others and managing talent.

In fact, the study found, executives whose interpersonal skill scores were low scored badly on every single performance dimension. A high self-awareness score was the strongest predictor of overall success.

As Green Peak's Becky Winkler pointed out, one reason for this is that executives who are conscious of their own weaknesses are often better able to hire subordinates who perform well in areas in which the leader lacks acumen.

However this critical factor is one that tends to be overlooked when companies evaluate potential leaders.

"Leadership searches give short shrift to "self-awareness," which should actually be a top criterion," Winkler said. "Evaluating technical competence alone isn't enough,"

Another factor impacting the effectiveness or otherwise of a leader seems to be the number of organizations they have worked for. Intriguingly, experience at many different companies is not a good plus. The more organizations an executive worked with early in his or her career, the lower their people management rating.

"Executives who change jobs frequently are often trying to outrun a problem, and that problem often has to do with how they 'fit' in the workplace," J.P. Flaum explained.

"Job hoppers also lack perspective on the outcome of their leadership decisions as they typically leave before the changes take effect."

People with multiple siblings also tend to be better leaders. Executives with more siblings were rated highly in their ability to manage people and drive results.

"There are limits on the degree to which someone can improve his or her basic ability to interact well with others, which means that focusing on interpersonal skills when selecting the right candidate becomes critical," Becky Winkler said.

"The challenge is that these qualities often aren't revealed by standard tests and interview techniques.

"Therefore, what's really needed is a change in focus: Boards, private equity general partners and management teams need to focus not only on what executive candidates do but also on how they do it."

However they might also bear in mind that in certain situations, directive leadership still has its place. As a 2006 study by Keith Hmieleski and Michael Ensley found, in fast-moving entrepreneurial businesses with heterogeneous teams, command-style leadership is more effective.

That's because teams comprising people with significantly different backgrounds and patterns of thought and behaviour take too long to reach consensus on goals in business environments requiring rapid action. But a directive leader can rapidly clarify what work needs to be done and by whom

Yet Hmieleski and Ensley also found that in heterogeneous teams in stable environments, empowering leadership is the clear choice because stable environments provide time for team members to reach cohesive decisions.

As Becky Winkler concluded, all this means that that boards and investors need to become more aware of the culture of the companies they own and run.

"Context matters," she said. "It's not enough for an investor or director just to sit in on board meetings, which has been the inclination. They need to understand how people interact in the company, and make sure that those interactions are positive and truly supporting the bottom line."