Opponents of servant leadership argue that the concept sounds good, but it just does not work in business. “Show me one study,” they say, “that proves Servant Leadership works for business.” I’ll do them two better. Here are three studies that prove Servant Leadership is good for business:
Good Company Index
In the book “Good Company“, an extensive study culminating in the “Good Company Index“, reveals how organizations that are: 1. Good employers 2. Good sellers and 3. Good stewards, consistently outperform competitors. The principles reflected in this book capture concepts critical to servant leaders: serving all your stakeholders – not just investors. Each year, the authors report the ratings for top companies, grading them on the index of good performance. So what about the results? How good is business for these “good” companies? According to the authors:
“…the stock price of the company with the higher grade outperformed that of its competitor with the lower grade by an average of 30.2 percentage points…”
Good to Great
In this landmark work, Jim Collins and his research team state a key component of turning a Good company into a Great company is “Level 5 Leadership”. The team chose the term, “Level 5 Leadership” over Servant Leadership, in part, for fear readers would misinterpret the concept as “servitude” or “weakness.” Since the original publishing of this book, many authors point out the similarities between Level 5 and Servant Leadership. So how did these Level 5 / Servant led companies perform?
Collins’ 5 year study identified 11 companies with Level 5 Leaders (the Good to Great companies). From 1995 to 2005, stocks from the 500 largest publicly-held companies averaged a 10.8% return. The Level 5 leader companies identified by Collins research averaged a 17.5% return.
Seven Pillars of Servant Leadership
In their book, “Seven Pillars of Servant Leadership“, Dr. James Sipe and Dr. Don Frick compared Collins Good to Great companies to “eleven publicly-traded companies that are most frequently cited in the literature as being servant-led“. Where the Good to Great companies point to Level 5 Leadership as a component of company success, the Sipe / Frick study pointed to Servant Leadership as the predominant factor for success. So how did these servant leadership companies perform?
In the Seven Pillars study, comparing a 10.8% average return to the 17.5% Good to Great returns, servant-led companies delivered a 24.2% return.
The Good to Great and 7 Pillar studies suggest companies with a component of Servant Leadership perform better than the average business. However, companies with Servant Leadership as a cornerstone of their business model perform more than twice as well as other companies.
So whether you call it practicing Good business, turning from Good to Great or Serving as you lead, it’s all good for business. So, the next time somebody asks you, “show me one study that proves servant leadership works in business”, tell them you’ve got three.
Question: What other evidence do we have that Servant Leadership is good for business?