Leaders help organizations run smoothly. They drive an organization’s profitability by ensuring productivity is high and that resources are managed efficiently and wisely.
One of the most important resources they manage is employees.
Leaders have such a profound impact on employees, that an organization’s future success hinges on how positive that impact is.
We know the damage bad leadership can do to a business’s profitability and long-term success. But the benefits of good leadership are endless and felt throughout an organization, both in the short term and the long term.
The benefits of leadership can be seen in an organization’s overall profitability because leaders impact employee engagement and retention, play an important role in employee motivation, and communicate culture and a sense of purpose to employees in ways that help them connect to their work and perform well.
In this article, we’ll look at the ways leadership benefits employees and organizations.
How Leadership Impacts Employees
An employee’s day-to-day interactions with leadership significantly impacts their employee experience, continually shaping their perception of their job over the course of their tenure with a company.
In fact, the duration of an employee’s time with an organization is primarily determined by the relationship they have with their direct supervisor, with about 50-70% of an employee’s perception of their work environment linked to the actions and behaviors of management.
Because everything a leader does affects the organization’s culture, and culture influences the employee experience, leadership—good leadership—offers many benefits for an organization.
Leadership can profoundly impact a business’s profitability due to the many ways that leaders affect the employee experience. According to a recent Harvard Business Review Analytic Services survey, 55% of executives said they believe it is impossible to provide a great customer experience without providing a great employee experience.
Good leaders guide employees, model core values that reinforce more of the behaviors employers want to see in the organization, and prevent work environments from turning toxic. This can result in high-performance teams of engaged, motivated employees who are loyal, culturally aligned with the organization, and united by a shared sense of purpose in their work.
Engagement
Since leadership plays such a powerful role in the employee experience, good leadership is the cornerstone of employee engagement.
Employee engagement is an employee’s emotional commitment to their work, the organization they work for, and its goals. It describes the bond an employee builds with their specific job and the organization.
Employee engagement affects an employee’s job satisfaction and well-being. The impacts of high engagement can also be seen in more tangible metrics such as retention, turnover, absenteeism, profitability, and productivity because engaged employees care about their work, are dedicated to the organization, and their attitudes and behaviors are aligned with the organization’s core values.
Of all the factors that affect employee engagement, leadership affects engagement more than any other factor, according to Business Leadership Today contributor Laurie Sudbrink.
Laurie says, “A leader’s ability to authentically build relationships with team members, their level of self-awareness, their sense of accountability, as well as their health and well-being, can all have a significant impact on employee engagement.”
Leaders authentically demonstrate their dedication to the organization’s core values through real, impactful actions and behaviors that help to build engagement.
Retention
Because leadership can positively shape the employee experience, which benefits the work environment, its culture, and, therefore, employee engagement, leadership also benefits employee retention.
Employee retention refers to a company’s ability to prevent turnover and retain its employees. Employee turnover refers to the number of employees who leave a job, either voluntarily or involuntarily, during a certain period of time.
Employee retention is driven by employee experience and employee engagement because an employee’s attitude toward their job and their level of engagement with the work they do determines whether an employee will stay or seek out other job opportunities.
Studies have shown that around 60% of people who leave an organization leave because of their immediate supervisor. This is why bad leadership poses the biggest threat to an organization’s future success.
Recruitment is a costly process. It costs more to recruit, train, and onboard a new employee than it does to retain one. Because the costs associated with recruitment can be so high, it can negatively impact an organization’s profitability.
Though it can vary by role and by industry, the average cost of hiring an employee is estimated to be around $4,000, but the expense goes beyond salaries. Recruiting, training, and competitive benefits packages add additional costs. Organizations spent more than $92 billion in 2020-2021 on training alone.
When you factor in the loss of productivity, the loss of institutional knowledge, and potential hits to morale turnover can cause, it can put a real dent in profits.
In addition to the expense of replacing an employee that leaves, the employee shortages associated with high turnover may cause remaining employees to experience burnout and higher stress levels due to increased hours and job duties, potentially leading to a toxic work environment and a vicious cycle of turnover.
Toxic work cultures, most often resulting from bad leadership, have been cited as one of the main drivers of the turnover we’ve seen with The Great Resignation and now quiet quitting.
An organization’s revenue can be significantly increased when it reduces the expense associated with hiring, increases productivity, and offers better customer experiences.
High employee retention benefits an organization in a variety of ways, including increased engagement, high performance, improved productivity, strong culture, sustainable profitability, great customer service, retained institutional knowledge, better employee morale, a positive work environment, and more focused management.
Good leadership is the key.
Good leaders understand that retention is a critical factor in an organization’s long-term success due to the high costs associated with turnover and know how critical retaining talented employees is to sustainable success.
Good leadership keeps workplace environments from turning toxic and creates a positive environment in which employees can thrive.
Motivation
Motivation drives an employee’s success and plays a vital role in employee satisfaction.
There are two types of motivation: intrinsic and extrinsic. A certain amount of both is essential for helping employees to engage with their work and perform well.
Extrinsic motivation is motivation to participate in an activity based on meeting an external goal, earning praise or approval, winning a contest or competition, or receiving an award or payment.
Intrinsic motivation is defined as doing an activity for its inherent rewards rather than for a separable consequence.
Motivation drives an employee’s success and plays a vital role in employee satisfaction. Intrinsic motivation, specifically, plays an important role in how employees feel about their jobs, how engaged they are with their work, and how well they do that work.
A leader’s ability to motivate employees determines how well they engage and retain employees, which ultimately determines how successful the organization is, and the most important job of any leader (and the key to being a great leader) is helping their team members reach their goals and do great work.
Leaders need to understand what really motivates their employees to best meet their needs and engage them with their work. They should work continuously to create the necessary conditions for their employees to stay motivated to excel.
It’s not just about ensuring the day-to-day work of the team is done; it’s about inspiring each team member to be fully invested in their roles and helping team members remove obstacles that might prevent them from reaching their full potential.
Good leaders use strategies that boost intrinsic motivation, resulting in employees that are more invested in their jobs. The effects of improved motivation can be seen in increased engagement, retention, productivity, and profitability.
Some ways to intrinsically motivate employees include offering more flexibility, maintaining good communication, providing constructive feedback frequently (and being receptive to feedback), encouraging collaboration, giving regular recognition of achievements and contributions, allowing employees to work with greater autonomy, and helping employees develop and advance professionally.
Culture
Leadership plays a vital role in helping organizations develop their cultures and in reinforcing culture with employees. Leaders shape an organization’s culture and communicate information about the culture, clearly articulating and modeling core values, mission, and vision.
Good organizational cultures are intentional, and good leaders are intentional about communicating organizational culture to their teams. Communicating culture provides clarity for team members about the organization’s expectations of them, both in terms of the work they do and their behaviors.
Culture plays a critical role in both attracting and retaining top talent and is crucial to helping employees see deeper meaning in their work, which is something workers are increasingly searching for when they job hunt.
Glassdoor found that 77% of workers consider a company’s culture before applying. Another study showed that 70% of employees say they wouldn’t work for a company that didn’t have a strong purpose.
A strong organizational culture will provide the meaning employees seek, and leaders help employees recognize this purpose by clearly and consistently communicating the organization’s culture and values to employees and helping them recognize the connections between the work they do and the impact of that work on the lives of others.
We recently sat down with Dave Gordon, author of TIP: A Simple Strategy to Inspire High Performance and Lasting Success, and discussed the impact leaders can have when they communicate culture and demonstrate values for their teams.
Dave says, “I’ve seen cultures fail because of a lack of communication. Cultures thrive because organizations get communication right.”
He also points out that a leader’s ability to communicate shared values is essential for helping them build influence with those they lead: “We are more likely to follow people who are like us, who have the same values as us.”
Purpose
One of the biggest benefits of strong leadership is that it helps build consensus around a shared vision and inspires teams to work together toward this shared vision. Communicating culture is one way leaders do this. Another way is helping employees find a sense of purpose in their work.
Employees who find the work they do purposeful are more engaged and less likely to leave. They will feel more passionate about the work they do and perform their jobs with greater enthusiasm when they find it meaningful.
When employees feel a shared sense of purpose with their co-workers and a strong commitment to an organization’s mission, vision, and values, it doesn’t just improve engagement. It improves morale, performance, trust, and overall job satisfaction.
It’s also a major driver of retention, and it is playing an increasingly important role in recruitment efforts.
A recent study revealed that 70% of employees say they would not work for an organization without a strong purpose, 60% would take a pay cut to work at a purpose-driven company, and 90% of employees who work at organizations with a strong sense of purpose say they’re more inspired, motivated, and loyal.
Having a sense of purpose and finding meaning in their work can help employees look beyond their daily job duties and see how their work impacts the world. This can be a great source of motivation for workers who are driven to work toward the greater good and see their jobs as a way to do that.
Having a job where the work one does is purposeful and has a deeper meaning beyond daily tasks can keep employees motivated, but helping employees see the impact of the meaningful work they do is just as important for keeping them motivated to perform well.
Good leadership is key in uniting employees with their teammates through a shared sense of purpose that is tied to their work. Leaders connect the dots between an employee’s day-to-day activities and the impact those activities have on the organization and the communities they serve.
Acknowledging the impact of employees’ work through frequent recognition can be a highly effective way of helping employees see the ways their work makes a difference, helping them find a greater sense of purpose in their jobs and letting them know that the work they do is seen, impactful, and appreciated by the organization.
Matt Tenney has been working to help organizations develop leaders who improve employee engagement and performance since 2012. He is the author of three leadership books, including the groundbreaking, highly acclaimed book Inspire Greatness: How to Motivate Employees with a Simple, Repeatable, Scalable Process.
Matt’s ideas have been featured in major media outlets and his clients include numerous national associations and Fortune 500 companies.
He is often invited to deliver keynote speeches at conferences and leadership meetings, and is known for delivering valuable, actionable insights in a way that is memorable and deeply inspiring.
