Page 55 - The extraordinary leader

32 • The Extraordinary Leader

What we found in this study was that the poor leaders actually lost money
for the company. Their performance was so ineffective that it appeared to
drive customers away. The good leaders, on the other hand, made a reason-
able profit for the company. Their performance, compared with that of the
bad leaders, represented a substantial change. However, the extraordinary
leaders nearly doubled the profit generated for the company by the good lead-
ers. Imagine the impact of transitioning 10 or 20 percent of leaders from the
“good” to the “extraordinary” category. It would add 10 to 20 percent to the
bottom line of the entire company.
In a related study, Rucci, Kim, and Quinn found what they called “the
employee-customer-profit chain” at Sears. Their study found that employee
1
behaviors affected customer behaviors, which in turn affected company finan-
cial performance. When customers enter a store where employees are frus-
trated and unmotivated, it affects their buying habits and their willingness to
return and purchase more items. Pleasant, considerate, and knowledgeable
sales associates had a positive effect on customers. These sales associates
encouraged customers to buy more and to come back. In their research, Rucci
et al. found that a five-point improvement in employee attitudes resulted in
a 1.3 percent improvement in customer satisfaction, which in turn increased
revenue growth 0.5 percent.
The implications of our research are that another link needs to be added
to the chain; for example, it should be “the leaders-employee-customer-profit
chain.” Figure 2-1 showed the impact that leaders have on employee com-
mitment and satisfaction, which ultimately translates into the direct impact
of leaders on profitability.
The new chain of cause-and-effect events is

Leaders Employees Customers Store Profits
One should also keep in mind that the additional insight this research adds
to the profit chain of events is that great leaders have even more impact on
employees, who affect customers and therefore create even greater profits for
the organization.

Impact on Turnover at an Insurance Company

Turnover costs companies millions of dollars every year. John Sullivan, chief
talent officer at Agilent Technologies in Palo Alto, California, put the cost of
turnover for a software engineer at $200,000 to $250,000 per departing