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

The research in five countries (Deshpande et al., 1997) showed that innovativeness of the firms was the most important factor in explaining performance differences, regardless of whether the managers were in Japan, the United States, France, Germany, or England. The significance of innovation was emphasized by Drucker (1954) when he stated that "any business enterprise has two--only two--basic functions: marketing and innovation." Also, Aaker (2001) claimed that long-term leadership in business requires continuous innovation. For example, Gillette returned to its innovative heritage to regain the leadership that it lost in 1960s (Aaker, 2001). Charles Schwab, one of the first major brokerage houses with Web-based trading, leads its competitors by providing innovative services, discount prices, and superior services via Internet (Lee, 2000). In the past, Sony, an innovative leader, introduced many new products, such as Walkmans and video cameras that created markets (Kotler, 2003). In a recent Fortune article (Kirkpatrick and Hamel, 2004) Hamel pointed out some of the myths about innovation being risky, and being about products and big ideas. He indicated that companies like Starbucks, Microsoft, and eBay disproved these myths. Hamel (Anonymous, 2004) claimed that there are no strategies for creating wealth in the long term that are not driven by innovation.

A study by Nohria et al. (2003) covering a 10-year period from 1986 to 1996 examined the management practices that helped companies outperform their industry peers. They identified four primary practices in which successful companies excelled: strategy, execution, culture, and structure. Nohria et al. (2003) also stated that these successful companies supplemented their skills in those areas with a mastery of any two of the four secondary management practices: talent, leadership, innovation, and mergers and partnerships. They call this winning combination the 4 2 formula for business success. Their study showed that companies' performance was directly linked to whether or not they adhered to the 4 2 formula. It is interesting to note that the two secondary management practices (talent and innovation) are the same suggested by Darling and Nurmi (1995).

Over the years, leadership has been studied to understand its impact on organization performance. It is generally expected that good leadership is the key to organizational success that leads to superior performance. Drucker (2001) claimed that there were no "leadership qualities;" he posits that effective leadership "is thinking through the organization's mission, defining it, and establishing it, clearly and visibly." Of 1,000 total points possible for the Malcolm Baldrige National Quality Award (2002), 150 points are available for the leadership category, which signifies its importance for organizational success. Past studies (Darling and Box, 1999, Darling and Nurmi, 1995, Nohria et al., 2003) have suggested that leadership is one element connecting organizational success factors. Darling and Box (1999) asserted that the development and implementation of effective and meaningful leadership strategies enabled the top managers, as noted by Business Week, to achieve success during the 1990s. The importance of leadership for organizational success was also supported by Nohria et al. (2003), who found that it was required to supplement primary management practices. Prior research suggests a positive correlation between leadership and performance for most organizations. Therefore,