September 25, 2013

Strategic Leaders Affect the Company’s Triple Bottom Line

Strategic leaders – executives who have overall responsibility for an organization and therefore affect organizational outcomes – are no longer asked to focus solely on maximizing shareholder wealth, but are expected to meet an increasing array of stakeholder expectations, from sustainability initiatives to socially driven demands from customers. This emphasis of focusing on the triple bottom line – financial, social and environmental – is reinforced by a 2011 survey of millennials by Deloitte, in which 92% of respondents said that a firm’s success should be measured by more than profit.

To date, most research on how strategic leaders affect organizational performance is based on a financial perspective rather than value creation in multiple arenas, and there is little research on how the values, experience and personalities of strategic leaders affect their business choices, actions and behaviors.

“However, we found ample evidence that leadership styles and values play an important role on organizational outcomes and corporate culture,” said Charles R. Greer, professor of management at the Neeley School of Business at TCU.

“Several leadership styles are found among strategic leaders, including more established styles such as transactional, transformational and charismatic approaches, as well as evolving styles such as authentic, servant and responsible approaches,” said Suzanne M. Carter, associate professor of professional practice in strategy at the Neeley School.

Their research, “Strategic Leadership: Values, Styles, and Organizational Performance,” appeared in the January 2013 Journal of Leadership and Organizational Studies.

Greer and Carter found that when the performance of more strategic leaders is evaluated by triple bottom line measures, there is evidence of greater use of transformational, charismatic and authentic approaches.  

“These strategic leaders tend to consider a broader range of stakeholders in their decision-making,” Greer said.

This broader range does not mean these leaders don’t focus on the bottom line. Greer and Carter found no evidence that their emphasis on financial performance is diminished with the addition of expanded measures of performance.

Another important finding is that the values of strategic leaders often pervade the company culture to affect outcomes.

“When top managers emphasize attention on the triple bottom line, they often change and shape the values and culture of the entire organization,” Carter said.

Existing research in corporate social responsibility shows a connection between the CEO’s role in corporate social performance through his or her influence on various stakeholders. For example, the commitment of a company to noticeably address environmental issues may stem from the leader’s own values.

Greer and Carter concluded that the emphasis on triple bottom line performance will increase as stakeholders make stronger demands on strategic leaders to make changes in the organization. They suggest that future research is needed to study the pressure on strategic leaders from multiple stakeholder demands, the effect of mixed leadership styles in top management teams, and the viability of novel approaches such as co-CEOs for dealing with the overload of increasing numbers of stakeholders and triple bottom line performance measures.

Carter, S.M., Greer, C.R. “Strategic Leadership: Values, Styles, and Organizational Performance.” Journal of Leadership and Organizational Studies, January, 2013.

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