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Transformational Leadership: Financial and Non-financial Performance

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When looking at leadership from a new perspective, an executive should understand its transformational value and place more emphasis on applying what works best for them in their current work environment.

One tool for executives to use, when looking to lessen the gaps between success and possible failure, is transformational leadership, allowing them to become a social architect.

Executives can contribute to organizational performance through developing relationships with subordinates that link a follower’s individual interests to the organization’s collective interests. Transformational leadership focuses on developing relationships that create valuable resources for companies.

Moreover, transformational leaders increase organizational performance, by reducing the times a company will falter. Many executives see organizational performance as an outcome of various factors such as leadership, interactions and communications, formal policies and rules, as well as a climate inspiring innovation and creativity within organizations.

With this in mind, executives are encouraged to improve the overall bottom line and increase total organizational performance. For instance, every executive is held to the grindstone of maximizing financial and non-financial measures – their careers are tied to company performance measures.

However, the focus on financial performance alone is insufficient, as firms need to also consider a range of other factors such as non-economic performance that is also reflective of their big picture performance.

As executives attempt to manage people more and more in-depth, they find that intellectual capital represents the forefront of success.

“Had I lost my top 50 employees, I would not have had an organization any more.” – Bill Gates

In order for executives to apply the knowledge conveyed in this article, we have incorporated both financial and non-financial performance indicators as targets to break through performance gaps in organizations.

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Identifying needs, financial and non-financial

For example, executives know that financial aspects include human capital ROI, gross margin ROI, earnings per share and stock price performance.

Scholars have also left an array of managerial implications for executives, such as the fact that non-financial performance is determined thorough aspects like active response to environmental changes, production and service quality, customer focus, innovation, and providing learning & growth opportunities for employees. Armed with these two tools, executives can effectively increase firm performance.

Transformational leadership is a leadership style that aggregates human capital into social capital and develops organizational communications aimed at providing valuable resources for all organizational members.

Thus, transformational leaders apply intellectual stimulation to enhance knowledge sharing among their human capital, across their entire organization. This leads to your employees becoming empowered, and empowered employees can enable an organization to actively respond to environmental changes and hurdles.

The key to take into consideration is identifying needs – both the organization’s and those of the employee. When transformational leaders show concern for the employee’s needs, individuals begin to contribute more and they become more inspired to put extra effort into their work. This extra effort improves the quality of products, customer satisfaction, and impacts the return on assets, sales, shareholder value, and improves operational risk management.

Transformational leadership highlights just how important your employees’ attitudes are when it comes to accomplishing commercial objectives.

For example, inspirational motivation can strengthen your workforce through tough times and allow you to set highly desired expectations more easily. The higher the level of expectation, the higher the motivation to enhance productivity and perhaps decrease organizational costs.

In conclusion, it is important to raise vital questions about how transformational leaders can successfully improve performance at all levels of the organization. In today’s article, we have very briefly outlined how transformational leadership can impact financial and non-financial performance.

This style of leadership can influence more far-reaching aspects of a company than other previous styles. Therefore, it is up to each individual CEO, CIO, CFO and so on to embrace transformational leadership if they wish to improve their results, whilst employing today’s generation of workers.

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Developing Great Leaders: Key Answers to Recurrent Questions
Engaging Employees – A Brief Overview for Managers
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