Leadership and organizational performance: State of the art and research agenda

Abstract

A large portion of the everyday discourse about leadership and leaders takes it for granted that leaders make a big difference in terms of performance. The football managers discussion is one clear example, the wider fascination with business leaders likewise marks this association – and so too the fascination with political leaders. However, the academic literature finds it hard to find reliable evidence for a clear association, because both main concepts (leadership and performance) are broad and difficult to define and because of many confounding variables that make it difficult to demonstrate clear cause and effect. But while some academics have seemingly abandoned the attempt to tackle this difficult but central subject, there are some who seek to trace the relationship. It can be shown that a change of leader does produce some kind of performance outcome. For example, appointments of some leaders and the dismissal of others can trigger dramatic shifts in stock prices. In this chapter we will systematically examine the relationship between leadership and performance, both theoretically (section 2) and empirically (section 3). In section 4 we will use public leadership and performance as illustrative of our analysis. We will conclude with an overview of the current state of the literature and we will outline a research agenda. Overall, we show that empirical studies have mainly found positive relationships between leadership and performance, although effect sizes vary considerably. However, cross-sectional designs with subjective performance measures tend to find relatively strong effects. Therefore, we advocate a systematic approach to studying the leadership-performance relationship with attention to research designs, and we urge that more panel designs and experimental designs are applied in future studies, because these enable scholars to assess changes over time and getter a much better grasp of causality.