A $10 Million Dollar Mistake

A vivid illustration of how important leadership selection is to an organization is the leadership change that took place at Nike. Phil Knight, Nike’s founder and chairman, selected Bill Perez as the new CEO. However, just thirteen months later Knight announced that Perez had resigned due to a lack of alignment between the leader and organization. This problem in leadership selection cost them $10.6 million in severance pay, in addition to organizational ineffectiveness without the right leader. However, many are still skeptical that the lack of alignment between the leader and the organization will have an impact on the effectiveness of the organization. Most just look for someone with leadership experience in a similar role.

It is obvious that selecting the right leader will not only reduce the costs and risks of a new leader failing, but can help the organization become more competitive and effective. Tenure among top leaders is declining significantly; thus, turnover is increasing. According to researchers, there is a direct result in a failure in leadership selection that impacts not only the perceived organizational effectiveness, but also top-line revenues, bottom line profits, and overall market value.

Leadership intelligence and experience are important, but they are not adequate predictors of effectiveness. According to researchers, it appears that a big contributor to effectiveness is leader-organization fit, and context matters when selecting leaders.

Values as Context

What is context? One way to think about context is person-organization fit in the form of value congruence. Value Congruence is the alignment of an individual’s values and the values of the organization. An extreme example of the lack of value congruence is if an individual were opposed to alcohol use, but worked in marketing for Anheuser-Busch. Value congruence can also be related to how well an individual’s values are in alignment with their leader. Another extreme example of this would be if the leader did not highly value honesty while the follower placed a high value on honesty. Thus, context as it relates to value congruence can be understood as the extent to which two sets of values are in agreement with each other. Leaders and employees with values that are similar to each other interact more positively and efficiently, and are more satisfied with their job. Conversely, when the leader demonstrates values that are different from the organization, similar to the two examples describe above, overall job satisfaction, organization commitment, and productivity decreases, while willingness to leave and turnover increases thus pointing to the need for organizations to consider context, or value congruency, when selecting leaders.

There are many other benefits to value congruence. Workers are more committed, satisfied with their job and with the organization as a whole, when there is perceived value congruency. Value congruence can lead to a positive work attitude, trust and even career success. When there is perceived congruency there is a greater likelihood that employees will follow through with the requests of the organization, therefore increasing the likelihood of completing tasks and obtaining organizational goals. Value congruence has also been found to be positively related to ethical behavior, whereas, a lack of value congruence is not neutral, but can have negative results such as job dissatisfaction, which leads to absenteeism, tardiness, or an intention to leave. Finally, when individuals perceive that their values are different from the organization, they are less motivated to lead. Therefore, since value congruence is helpful in explaining retention, turnover and level of effectiveness, organizations need to understand this topic and consider it as a proxy for context in regards to leader selection.

Application

Many Christian organizations feel that if they can just find a Christian leader with experience in the same role, assuming that if the leader is a Christian, their values will be congruent with that of the organization. This is not necessarily true. The organization needs to take time in the selection process for the potential leader to articulate their values, and specifically their work values. Likewise the potential leader needs to have those within the organization articulate and describe the values of the organization. There are also tools and assessments available that can be taken advantage of during the process. Just assuming that value congruency exists between a leader and an organization can be a costly mistake.