How Much Do Good Leaders Really Matter? What 20 Years of Research Reveals 

Markets change, economies shift, and competitors come and go. 

But when measuring their mettle against all these external forces, what difference do good leaders actually make?  

Research over the past two decades shows us exactly how management drives organizational performance, profitability, and long-term success. 

Looking at Indian textile firms, researchers found something interesting (but not unexpected): better management meant 17% higher productivity in just one year.  

The changes made by this “better management” segment of the study weren’t fancy changes—just basic improvements in quality control and inventory management. Within three years, these same firms were opening new factories.  

Often, companies just didn’t know about better management practices rather than lacking the ability to use them. 

The impact isn’t limited to developing markets. A study of 732 mid-sized firms in developed economies found that strong management practices directly lead to higher productivity, better profitability, and improved company survival rates. 

American vs. European Management: The Performance Gap

When comparing firms across the US, France, Germany, and the UK, researchers found American firms performed better than their European counterparts. The reason? Better management practices and more competitive markets that pushed out poorly-run companies. American companies do better with incentives, while Swedish firms lead in monitoring practices. 

Competition matters here. In tough markets, poor management gets weeded out naturally. This explains why family-owned businesses in protected markets often struggle with management quality—they don’t face pressure to improve. 

What Individual Leaders Bring to the Table

When researchers tracked managers across different companies, they found each leader left a distinct mark. Here’s what the data showed: older managers consistently made more conservative decisions about spending and growth. MBA graduates, on the other hand, pushed for bolder strategies and took calculated risks. 

These weren’t just stylistic differences—they affected real business outcomes. Companies paid more to keep managers who delivered better results, especially firms with strong governance.  

The research backs this up, too: CEOs alone drive about 14% of the difference in company performance. This might not sound huge, but considering all the factors that affect business success, it’s significant. 

What Bad Management Costs

Sixty-five to seventy-five percent of employees say their biggest problem at work is their direct manager. Worse still, teams consider about half of all managers incompetent. This isn’t just about unhappy employees—these feelings of discontent impact productivity, retention, and profits. 

When managers fail, everyone suffers. Poor management leads to unsatisfied employees, more people quitting, and less getting done. The money this costs companies adds up fast. 

Why Team Leadership Beats Star Power

Star CEOs grab headlines, but company success depends on how the entire management team works together. Studies show that organizational effectiveness comes from collective leadership, not individual brilliance.  

The best-performing companies don’t just have talented individuals—they have management teams that complement each other’s strengths and work in sync. 

Why Happy Employees Mean Better Business

Satisfied employees deliver better customer service and drive stronger financial results. But what makes employees happy? Mostly, it’s how well they get along with their managers. This relationship affects everything from daily work to long-term commitment. 

Research links happy employees to better financial performance and loyal customers. When managers support and value their people, employees work harder for customers and help the company succeed. 

How Leadership Style Shapes Success

Different leadership approaches create different company cultures. Whether hands-on or hands-off, a leader’s style affects how well teams perform and whether the organization succeeds. 

Leadership style matters beyond the office walls. It changes how the company deals with customers, handles problems, and adapts to change. Smart leaders know this and deliberately shape their company’s culture to get better results. 

About the Author

Luana Cosma is a Partner at Stanton Chase Paris and Lyon, specializing in executive search, assessment, and development. With over 15 years of experience in leadership and operations management, she brings expertise across healthcare, life sciences, consumer products, and industrial sectors. She holds degrees in law and psychology, and a master’s degree in private comparative law. Certified in multiple assessment tools including Hogan and Hofstede Insights, Luana is passionate about diversity, inclusion, and fostering authentic leadership.