Business leaders often make organizational decisions based on personal experience. Why shouldn't they? Isn't the study of leadership a soft science? Leadership is an art and can't be studied like medicine or chemistry, right?
This is perennial flawed thinking in business. The study of leadership—and management—is often more reliable and valid than much of medical research. When I worked in the biotech industry as a management consultant, it was often difficult to convince leaders that simple evidence-based principles of organizational psychology could lead to substantive business results. And of course, these were ostensibly hard scientists—many of them medical doctors—in positions of organizational leadership.
And why bother listening to organizational psychologists? The company was leading the industry in profit margin, producing cancer treatments that went through rigorous clinical trials and government approval before hitting the market. Tarceva was (and still is) used for non-small-cell lung cancer and pancreatic cancer. After six years of development, pilot testing and final Food and Drug Administration (FDA) approval, Tarceva became one of the most effective pancreatic cancer treatments available. At a cost of roughly $3,000 for a month's supply of thirty 25mg tablets, patients could expect to extend their lives by a median of two months compared with a placebo. That groundbreaking treatment based on years of hard science extended life expectancy beyond a placebo pill by 0.2 percent of total average life expectancy.
What about other more commonly used medicines? What's the correlation between ibuprofen, the active ingredient in Advil and Motrin, and reduction in pain? Scientific research shows the correlation to be .14, or in other words it accounts for less than 2 percent of variation in pain. How about the effectiveness of sleeping pills? The mean correlation of taking a sleeping pill with subsequent sleep quality is .3, or in terms of accounting for total variation in sleep quality, it explains 9 percent. In other words, more than 98 percent of pain is not impacted by ibuprofen and 91 percent of sleep quality is not influenced by sleeping pills (see Meyer et al., 2001 for a review). Yet in my experience most business leaders wouldn't question the efficacy of pain relievers, sleeping pills and blockbuster cancer treatments.
So how does so-called soft science compare with biotechnology and the pharmaceutical drug industry? We can look at meta-analytic studies (where researchers combine all extant individual studies on a topic to yield an overall validity coefficient) to get an overall estimate of leadership practices and business outcomes. Let's start with perhaps the most commonplace management practice of incentive pay for performance, which displays a mean correlation of .32 between pay and individual productivity.
Sure, it's barely more efficacious than your standard sleeping pill. But that's why organizational psychologists don't typically prescribe a single procedure for business leaders to enhance job performance. For example, a structured selection practice for job applicants explains roughly 40 percent of variation in job performance. Specifically, a cognitive ability assessment combined with either a work sample or structured interview is correlated with subsequent job performance at .63. This evidence is nothing new to organizational scientists. We've known for years that constructs like cognitive ability, personality and integrity predict a host of important work performance behaviors, and when used in combination they often outperform the validity coefficients of the so-called hard science.
What about the leadership practice known as Management by Objectives (MBO) wherein leaders establish specific company objectives and then set a standardized process by which employees align their individual goals with those of the company? The correlation between a leader's commitment to management by objectives and company productivity is an impressive .67. Want to engender trust, and a whole host of positive outcomes, among employees? Train leaders to enact authentic leadership. The correlation between authentic leadership and trust is .69. Likewise, leaders would do well to weed out abusive supervisors, because the correlation between abusive supervision and counterproductive workplace behavior (e.g., absenteeism, incivility, bullying, substance abuse) in the U.S. is .65. Fortunately implementing structured selection practices, enacting MBO, developing authentic leadership practices, and dissuading abusive behaviors are fairly straightforward.
Of course, this isn't to say small correlations aren't important. For example, the correlation between smoking and developing lung cancer over a 25-year period is .08. While that represents less than 1 percent of lung cancers, the Centers for Disease Control and Prevention points out that smoking is the leading cause of lung cancer in the U.S. with cigarette smoking linked to between 80 percent and 90 percent of deaths resulting from lung cancer. So of course, both efficacy and impact need to be considered.
Indeed, if the best cancer treatment extends life by an average of two months, then it's up to the individual to determine the subjective value. When it comes to raw statistics, however, the science of organizational behavior is formidable. It's time to move beyond the colloquial term "soft" science and skills when referring to organizational leadership—perhaps toward something more descriptive such as "CORE" (Competence in Organizational and Relational Effectiveness) science.