Investigating the impact of organizational excellence and leadership on business performance: an exploratory study of Turkish firms

SAM Advanced Management Journal, Wntr, 2008 by Musa Pinar, Tulay Girard

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Introduction

One of the realities of the current global marketplace is that consumers expect more, have more choices, and are less brand-loyal (Best, 2004). Yesterday's invincible companies with their market domination and leadership, such as GM, Sears, AT&T, and IBM to name few, have had to restructure and reengineer their organizations to respond to changing customer needs, emerging global competitive forces, and new economic realities. Furthermore, there is no guarantee that current leaders, such as Microsoft and Wal-Mart, will continue to dominate over the next decade.

A number of studies have investigated the factors that are critical for success. Some of the factors identified are customer focus (orientation), quality of personnel, and innovation as key for better business performance (Best, 2004; Drucker, 2001; Kotler, 2003; Peter and Austin, 1985; Peters and Waterman, 1982; Wing, 1988). Treacy and Wiersema (1995) suggest that market leaders excel at delivering the best value to their customers through one of the value disciplines--best product, best total costs, or best total solutions. Feigenbaum (1997) asserts that companies that were pacesetters in the 1990s had two important characteristics: respect for and responsiveness to the customer, and an unrelenting drive to enhance business efficiencies. In addition, Nohria et al. (2003) identify strategy, execution, culture, and structure as four primary management practices that successful companies implement. They claim that these companies supplement their great skills with a mastery of any two of the four secondary management practices--talent, leadership, innovation, and mergers and partnerships.

The findings of these studies are consistent with the three key organizational excellence factors necessary for high performance presented by Darling and Nurmi (1995): care of customers, committed people, and constant innovation. Studies that investigated the impact of each of these factors on performance have supported the conclusions of Darling and Nurmi (1995). For example, prior research found a significant relationship between customer orientation (focus) and business performance (Best, 2004; Brynjolfsson and Hitt, 1996; Jaworski and Kohli, 1993; Kohli et al., 1993; Narver and Slater, 1990; Pinar et al., 2003; Van Egeren and O'Connor, 1988), suggesting that successful organizations have a customer-oriented business culture (Anthanassopoulos, 2000; Deshpande et al., 1993; Shapiro, 1998). Studies have also shown the effect of personnel quality and commitment on business performance (Hosmer, 2001; Kotler, 2002, 2003; Reichheld, 1996; 1993; Rucci et al., 1998; Wiley, 1991; Zacharias, 2001; Zeithaml and Bitner, 2000). Finally, several studies have documented the role of innovation on business performance (Aaker, 2001; Drucker, 1954; Hamel, 2002; Deshpande et al., 1997; Kotler, 2003).

In addition to these organizational excellence factors, leadership has been studied to understand its impact on an organization's performance. It is generally expected that "good" leadership is the key to the organizational success that leads to superior performance. Many years ago Sun Tzu explained that successful strategy results from effective leadership among other things (Wing, 1988). Kirkpatrick and Locke (1991) empirically showed that leadership characteristics were correlated with firm success. Darling and Nurmi (1995) suggested that one element connecting these three areas of organizational excellence attributes (care of customer, committed people, and constant innovation) is effective managerial leadership. They pointed out that organizational excellence is achieved through the development and implementation of leadership strategies. Based on their research, the four characteristics of successful leadership strategies are attention through vision, meaning through communication, trust through positioning, and confidence through respect. Prior research suggesting a positive correlation between leadership and performance for most organizations is also supported by Nohria et al. (2003).

While some studies emphasize customer focus, quality of personnel, and innovation as key requirements for organizational success, others suggest the importance of leadership. However, most studies combined the effects of the organizational success factors and leadership. Therefore, the main objective of this exploratory research is to empirically examine the relationship between the three organizational success factors and four leadership factors and their potential impact on the performance of Turkish firms, utilizing the framework developed by Darling and Nurmi (1995). Turkey, as one of the world's emerging economies, has been moving toward greater modernization as it has opened up to foreign competition since recently becoming an associate member of European Customs Union. Turkey's business environment and cultural values differ from those of U.S. and Western European nations. The authors believe that Turkey provides an excellent context for testing the effects of organizational excellence factors and leadership strategies on business performance.