Page 301 - The extraordinary leader

278 • Appendix

Evaluating the Relationship Between Managerial
Effectiveness and Profitability (Figure 2-2)

A total of 1,672 assessments were distributed to employees, who assessed man-
agers in 35 regions of a mortgage bank. Managers had an average of nine
assessments done on them by their boss, peers, and direct reports. The 360-
degree assessment was custom-designed to measure specific competencies
thought to differentiate high- and low-performing managers. The assessment
survey had 65 items. A leadership effectiveness index composed of 15 survey
items was correlated with the net profit for each region. The Pearson corre-
lation between the leadership effectiveness index and net profit was 0.40 (PC
0.000). The leadership effectiveness index was then divided into three cate-
gories based on the distribution of the index.
The three categories were: bottom 10 percent, middle 80 percent, and top
10 percent. Figure 2-2 shows the strong impact of poor and extraordinary
leadership.

Evaluating the Relationship Between Managerial
Effectiveness and Turnover (Figure 2-3)

An insurance company administered a survey to work groups in which
leadership effectiveness was assessed. Eighty-nine groups matched up aggre-
gated survey results with annual turnover data. The leadership effectiveness
measured was composed of 10 survey items assessing the effectiveness of the
work group manager. The Pearson correlation between the leadership effec-
tiveness index and turnover was 0.29 (PC 0.007). The negative correlation
was created because the higher (more positive) the leadership effectiveness
measure, the lower the turnover. The leadership effectiveness measure
was divided into three categories (bottom 30 percent, middle 60 percent, and
top 10 percent) to create Figure 2-3. The cut points on the categories were
chosen because of the consistency of turnover within each of the groupings.

Evaluating the Relationship Between Managerial
Effectiveness and Intention to Leave (Figure 2-4)

The same data set that was used to create Figure 2-1 was also used to measure
intention to leave. This was the combined results from hundreds of different