Leadership Impacts Return on Investment

In a survey involving 94 companies, Richard Roi (2006) asked executives to rate their company’s senior leadership on The Five Practices of Exemplary Leadership® by completing the Leadership Practices Inventory (LPI). Then he analysed the company’s long-term financial performance (over a 10 year period; 1996 – 2005) using net income and stock price growth. The relationship between transformational leadership practices (combining all five leadership practices into a single measure) and company financial performance was dramatic.

Companies with a strong and consistent application to these five leadership practices had:

• net income growth of 841% versus 49% for companies with a low incidence of leadership practices.
• stock price growth was 204% for strong leadership practices companies compared with only 76% for companies with a weak implementation of leadership practices.