Why CEO style should contrast with culture

Should CEOs align their leadership style to match the firm’s culture? While that may seem like a commonsense, logical approach, a new study from Angelo Kinicki indicates that embodying a leadership style that contrasts with the organizational culture may result in higher financial performance.

When considering what type of CEO leadership is best for an organization, a lot of theoretical work has focused on the benefits when a leader embodies a transformational or charismatic style. But there are broader, more applicable questions on the fundamental relationship between leadership and culture

1. How does a leader’s style interact with a firm’s culture?
2. What’s the best mix for positive financial performance?

A new study from Emeritus Professor of Management Angelo Kinicki and his colleagues published in the Journal of Applied Psychology indicates that the balance a CEO strikes between his or her own leadership style and the firm’s culture has a direct effect on overall company performance. Surprisingly, a leader’s success may hinge less on modeling the company’s most widely held cultural behaviors and values, and more on doing the opposite.

“Our study found that firms are most effective when levels of CEO leadership and culture are dissimilar,” says Kinicki. “When a leader’s behavior delivers information and support not provided by the organizational context, financial results tend to be higher.”

As unexpected as this finding sounds, a clear rationale explains how this dynamic of contrasting senior leadership with the culture can work to a company’s advantage.

A proven link between leadership and culture

The study set out to examine the interactive relationship between an individual CEO’s leadership style and company culture, and how it impacts firm performance. Kinicki’s team of researchers gained unusually direct access to 114 CEOs and 324 top management team members in the high-tech industry, as well as their financial performance metrics.

They obtained data about both the leadership and organizational culture, identifying whether each used primarily a task-oriented or relationship-oriented approach in achieving organizational goals. They also measured firm return on assets (ROA) and net income divided by assets, both nine months prior to and after the study.

They found that both style and culture have an interrelated impact on financial performance.

“We used the two meta-themes of task and relationship because they are broadly applicable and offer a clear contrast in characterization of both leaders and cultures,” says Kinicki. “In fact, these two orientations may be just as important for CEO effectiveness as they are for leaders at lower levels of the organization.”

In terms of leadership style, a task-oriented leader is focused on getting things done: by setting direction, monitoring performance and aligning resources. In contrast, a relationship-oriented leader focuses more on building personal connections, maintaining communication and social networks, and motivating employees.

At the same time, senior leaders function within an existing environments. They operate within organizational cultures that have shared values and norms that inform employees how they should think, feel and behave.

“Culture is a salient social contextual factor that helps employees make sense of their environment and direct attention to facets of organizational function that are valued, rewarded and supported,” the study explains.

For example, a task-oriented culture emphasizes the importance of the “what” — strictly getting the job done in terms of being productive, gaining market share and driving profitability. At the opposite end of the spectrum, a relationship-oriented culture values “how” the job is done — through communication, developing people and enhancing engagement. Although most companies have elements of both, there typically is a dominant style that guides the overall culture.

“The question is not which approach is better — task or relationship — but which balance of leadership style is right for each type of culture,” says Kinicki.

With these parameters in place and data gathered, the study then asked: do similarities or differences between CEO leadership and culture have a more positive effect on firm performance?

The answer may be surprising to many. Findings indicate that a leadership style that contrasts with, rather than supplements, the dominant organizational culture is more beneficial for the company.

Opposites impact

Why shouldn’t a leader align their style with the firm’s culture? “Because it’s redundant,” says Kinicki. “CEO leadership that reinforces the current organizational culture may generate abundant resources of unnecessary guidance that fail to enhance firm performance.”

In other words, a strong culture can serve as a substitute for leadership. A CEO who brings more of the same, rather than something fresh and different, duplicates rather than expands. Yet, when a CEO brings an approach that is lacking in the existing culture, the financial performance, measured by ROA, tends to be higher. Here’s how this process unfolds.

In a “high-task” culture with dominant task-oriented expectations, a CEO who applies high-task leadership is likely to be perceived as controlling or overbearing. It’s simply too much of that kind of leadership. Evidence shows that leaders who apply a task-oriented approach more than the culture needs face the potential consequences: decline in employee trust, lower job satisfaction and lower firm performance.

On the other hand, this same task-oriented CEO may be welcomed with open arms at a company with a “low-task” culture by focusing the organization on getting things done, achieving goals, and beating competitors.

The same principle works for relationship-oriented cultures. A “high-relational” CEO may be redundant or ineffective in a “high-relational” culture. For example, a corporate culture that is already good at making people feel included may not benefit from the CEO who walks in the door and promotes more relationship building. If that culture is working fine, then what impact does the CEO make other than being a figurehead?

At the same time, a “high-relational” CEO who walks in the door of a “low-relational” company where supportive, fair and collaborative attitudes are not the norm would be seen as bringing positive new benefits such as open communication and employee engagement.

Kinicki has repeated the study in other industries and these findings have been consistent.

“This finding is widespread across different industries, not just in the high-tech world,” says Kinicki. “Cultures that do not value employee empowerment, prosocial interactions and cohesiveness benefit from relationship-oriented leaders who can build positive interpersonal relationships, cooperation, collaboration, and support — and vice versa.”

Takeaways for finding the right fit

When considering which leadership style is the right fit for an organization, CEOs, search committees, placement professionals and anyone interested in organizational culture or leadership development can draw several practical conclusions from this study.

“CEOs tend to hire leaders aligned with their own values,” says Kinicki. “That’s something to watch more carefully, as studies indicate this may be redundant, versus relevant, to the company’s needs.”

CEOs are most effective when they bring either a task or relational approach that is opposite to the cultural norm of the company. On the other hand, CEOs are least effective when they bring either a task or relational approach that is already strongly established in the organizational culture.

But CEOs may not always have the self-awareness to know which style they bring to the table — they may see the culture more clearly than themselves. For this reason, leaders will benefit from feedback from their management team to ensure they have an accurate perception of their own dominant style. This kind of self-reflect may be especially important for CEOs trying to understand why a certain position is not working out for them.

Bottom line

• “Keep in mind that it’s easier to change individual leadership style than an entire firm culture,” says Kinicki. “Also, a company’s needs tend to change over time. What’s good for the organization today may not meet its requirements for future success.”
• One particular caution: If a firm’s culture is highly competitive and task-focused, then applying the same type of task-oriented leadership will come across as overbearing to employees and strain their psychological and motivational resources.
• In striking the right balance between leadership and culture, leaders should be alert to the organizational context and adjust their levels of task or relational style accordingly. Companies and executive recruiters also should factor this dynamic into their hiring choices at the CEO level.
• Ongoing consideration of both leadership and culture by CEOs and organizations alike will help ensure that senior leaders avoid emphasizing existing cultural values and deliver qualities lacking in the organization.