Does great leadership always translate to better organizational performance?

According to The Hay Group's seventh annual study of the 20 Best Companies for Leadership, it does.

The companies listed as Best Companies for Leadership (BCLs) out-perform Fortune 500 companies by 100 percent over 10 years.

These companies share another common denominator, however; they value innovation over corporate culture. They view innovation as the driver of shareholder value and understand a significant and continual investment leads to bottom line performance over the long-term.

Rick Lash of the Hay Group summarized the study’s findings in the Harvard Business Review. He identified five critical areas in which these companies lead with innovation.

Five Ways to Lead with Innovation

• Create a space for innovation. Nurturing, rewarding, and never punishing is the key to providing a supportive environment for innovation. Employees should feel encouraged to take calculated risks. Toyota accomplishes this by focusing on long-term returns, and less on the short-term. They were first to market in the hybrid category with the Prius; it was the result of a decade-long investment that finally paid off, creating for them a brand as a product innovator.
• Have a culture of corporate fluidity. In a constantly changing environment, organizations need to be ready to adapt quickly. Job descriptions, titles, and corporate hierarchy should be met with a certain fluidity to ensure ease of transformation to meet the changing marketplace’s demands. This culture provides employees flexibility and motivation. The study shows BCLs who do this, gain a competitive edge in the talent market. Top talent isn't always motivated by financial compensation.  They want potential to grow.
• Is open to new ideas. BCLs are open to feedback and input on new products from a variety of sources.  Companies such as Unilever solicit new ideas by crowdsourcing either in an online chat, or by way of social networks. Unilever uses their Open Innovation Initiative to solicit ideas from stakeholders and the community.
• Encourage collaboration. Many great ideas come from brainstorming or true collaboration. Innovative organizations have systems in place to ensure creative group thinking take place. They also place great value on where these ideas initiated. Everyone involved in the process is duly rewarded and recognized.
• Learn great lessons and celebrate wins. BCLs are twice as likely to celebrate wins, but also see setbacks or losses as an opportunity to improve. If employees see leadership as willing to learn from mistakes, they are more willing to take the risks needed to share innovative ideas.  Dell, for example, measures employees on “leading courageously” rather than measuring solely based on wins and losses.

Lash leaves us with three questions we should be asking ourselves if we want to truly foster innovation:

1. In our drive to think about the big picture, are we overlooking smaller opportunities that could have greater effects on the organization?
2. Should we be spending time dedicated to innovation expanding our own knowledge or, by doing so, are we overlooking other existing opportunities within the organization?
3. Are we doing something to scare ourselves daily? Are we pushing the envelope?

I’d love to hear your thoughts on innovation. Would you add anything to this list?

Thanks to The Daily Galaxy for the image.