In a study of top and middle managers (CEOs, VPs, and senior managers) in 125 Chinese firms, researchers (Wang, Tsui, & Xin, 2011) investigated the degree to which CEO leadership behavior influenced the performance of the firm. They also considered the degree to which employee perceptions of the CEO impacted firm performance. Firm performance was measured in terms of profitability, asset/sales growth, market share, and competitive status within the industry.
Leadership behavior can be broken down into two categories: task-oriented and relationship-oriented. Task-related behavior includes goal-setting, articulation, and monitoring of progress. Relationship-oriented behavior focuses on developing employee-leader relationships and includes trust, understanding/consideration of employee problems, and supporting employees.
The researchers found that CEO leadership behavior can impact a firm’s performance both directly and indirectly. Task-focused behaviors have a direct relationship with the firm’s performance. This finding is pretty straight forward—when leaders set goals, communicate those goals clearly to employees, and monitor progress, the goals are more likely to be met and the firm performs well.
What about relationship-focused behavior? It plays a role, but in a more indirect way. Relationship-oriented behavior affects employees’ perception of the CEO (e.g., “the CEO is likeable and cares about me,” or is “not likeable and does not care about me”). These perceptions of the CEO’s behavior influence the employee’s commitment to the goals. Employees who believe their leaders care about them and feel supported will work harder to reach or surpass the goals established by the leader. On the other hand, employees who view the leader’s behavior more negatively are less likely to exert quite as much energy.
PRACTICAL IMPLICATIONS FOR ORGANIZATIONS
It’s important for CEOs and managers to demonstrate a mix of task- and relationship-oriented behaviors. Leaders who effectively communicate roles and goals, and monitor progress can typically expect better performance. Likewise, managing employees’ perception of the leader is important as well. Employees who view their leader’s behavior favorably are more apt to work hard and achieve the aforementioned goals.
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