Servant leadership grows profits - research

A new study found a link between employee-centred managers and better financial performance in a French chain.

by Stephen Jones
Last Updated: 24 Jul 2020

The question of who serves whom in an organisation isn’t as straightforward as it sounds.

For proponents of Milton Friedman’s theory of the primacy of shareholder value, the idea that a leader exists for any other reason than to serve the interests of investors is folly. Under this doctrine the company’s employees are there to serve the leader in the accomplishment of their profit-driven mission. 

When Robert Greenleaf first suggested in 1970 a different model - that the leader could exist to serve the 'enhancement' of their employees, a style he termed servant leadership - it was met with scepticism. Focusing time, attention and resources on the betterment of staff, while a nice thing to do, would inevitably be to the detriment of the bottom line. 

New research suggests this assumption is misguided, and that in fact adopting a servant style of leadership can actually help grow profits.

Researchers from emlyon business school in France, the University of Illinois, Rotterdam School of Management, Erasmus University and the University of Auckland studied the leadership structure of 55 stores in a French chain. All stores were from the same large metropolitan area, were a similar size and had identical management structures reporting directly into the general group management. 

The researchers compared the level of profit growth in each store with the different types of leadership practised there. 

The average growth across stores was negative, but of the 22 stores that grew profits, 18 were run by managers who scored highly when it came to servant leadership, which the researchers say demonstrates a tangible link between servant leadership and profit growth, especially when combined with other studies on the subject.

The researchers defined servant leaders by seven behavioural traits: 

- They care for each individual employee when he or she incurs setbacks in their professional or even personal life

- They empower people to find their own ‘best’ way of working

- They display ‘conceptual skills’ that enable them to understand and find solutions to complex situations

- They help employees develop

- They behave ethically and encourage values based decision making

- They ‘create value for the community’ that extends ‘beyond the boundaries of the organisation’

- They put employees first

The findings highlight that employees see receiving help from their managers as an important dimension of leadership, says Vincent Giolito professor of strategy at emlyon business school, a value that could be important for organisations trying to “overcome the unprecedented challenges brought by the current crisis”. 

“There has always been the suspicion that servant leaders have better performance because they may be ‘nice’ to their teams, which could be at the company’s expense. By showing servant leadership as conducive to profit, we may help resolve a fundamental tension between employees and shareholders.”

Image credit: Marko Novkov / EyeEm via Getty Images


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