Assessing the utility of executive leadership
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The financial impact of high-performing executive leaders on organizational performance was determined through the application of a linear decision-theoretic utility procedure. Using archival data from 132 industrial organizations from the Fortune 500 for which data was available over a fifteen year period (1971-1985) in combination with estimates of SDy from a sample of financial analysts (n=41), an after-tax utility point estimate averaging over twenty-five million dollars was computed based upon average executive tenure, illustrating the instrumentality of a high-performing executive leader. The discussion noted that the average percent-impact estimate of the financial analysts was almost identical to the average effect size associated with leadership from two often-cited executive succession studies (Lieberson & O'Connor, 1972; Salancik & Pfeffer, 1977). This consistency of impact estimates, across alternative techniques using objective and subjective sources, is contrary to the suggestion that individuals over-attribute organizational performance outcomes to leadership (e.g., Meindl, Ehrlich, & Dukerich, 1985; Meindl & Ehrlich, 1987). An explanation for these conflicting results is framed within the context of the results of prior research on expert/novice differences in decision making. 1991.
