personnel psychology

Developing leaders is what business schools aspire to contribute to society. The pledge to do so features prominently in mission statements, web pages and course brochures—and it is as appealing as it is controversial. While large numbers of students flock to undergraduate, MBA and executive programs that promise to transform them into “leaders,” the last decade has seen a mounting wave of criticism of what happens in those programs. Questions have been raised from outside and within management academia not only about whether and how business schools truly fulfill their promise to develop leaders, but also about what kind of leaders their graduates become and on whose behalf—with whose interests at heart—they lead.

For all the fascination and controversy that surrounds leadership, there is broad consensus on two key points. First, becoming a leader is not just a matter of acquiring a body of knowledge and practicing a requisite set of skills. It entails deeper personal work. That is, it requires acquiring a clear sense of oneself—an identity—as a leader, and aligning it with one’s personal values, history and purpose. The second point of consensus is that becoming a leader—and staying one—is a social endeavor. It requires understanding, connecting and giving voice to, the social context that ultimately grants or denies one’s permission to lead. Learning to lead, in short, is not an abstract matter. The only way to do it is through experiences—of leading as well as of following—and ongoing reflection on those experiences to distil lessons that may in turn inform future practice.

Strategies used to reward and recognize employees’ efforts have become more sophisticated over the years. However, only recently have employers begun to move beyond traditional (usually financial) incentives and consider ways to make work truly rewarding. In addition, state-of-the-art social and affective neuroscience—using techniques such as fMRI, or functional magnetic resonance imaging—has illuminated how the brain responds to various types of rewards.

Research on employee recruitment has shown that an organization's corporate social performance (CSP) affects its attractiveness as an employer, but the underlying mechanisms and processes through which this occurs are poorly understood. We propose that job seekers receive signals from CSP that inform three signal-based mechanisms that ultimately affect organizational attractiveness: job seekers' anticipated pride from being affiliated with the organization, their perceived value fit with the organization, and their expectations about how the organization treats its employees. We hypothesized that these signal-based mechanisms mediate the relationships between CSP and organizational attractiveness, focusing on two aspects of CSP: an organization's community involvement and pro-environmental practices. In an experiment (N = 180) we manipulated CSP via a company's web pages. In a field study (N = 171) we measured CSP content in the recruitment materials used by organizations at a job fair and job seekers' perceptions of the organizations' CSP. Results provided support for the signal-based mechanisms and we discuss the implications for theory, future research, and practice.

When former General Electric CEO Jack Welch told the Financial Times four years ago that "on the face of it shareholder value is the dumbest idea in the world," and cited workers as among a company's main constituencies, the irony was obvious. Here was the man whose ruthless approach to employee relations had earned him the nickname Neutron Jack (after a nuclear weapon designed to kill people without destroying property) but who now seemed to be suggesting that employees were worthier of top management's concern than company investors were.

How important is worker satisfaction to corporate financial performance? Notwithstanding Mr. Welch's apparent change of heart, demonstrating such an effect has proved elusive. "There is still much debate on whether these variables are actually related in practice," begins a paper in the current issue of the scholarly journal Academy of Management Perspectives.

The study then proceeds to provide what its author, Wharton professor Alex Edmans, claims to be the strongest demonstration to date not only that the two are related but that worker satisfaction is a significant driver of firm value rather than just a happy byproduct of it. Focusing on the yearly listing in Fortune magazine of the 100 Best Companies to Work For In America, the University of Pennsylvania professor finds that those firms generate considerably higher annual stock returns over the long term than the broad market does -- as much as nearly four percentage points higher per year.

Equally important, Wall Street seems largely impervious to this impressive impact. Noting the intangible nature of employee satisfaction, the study asserts that "the stock market uses traditional valuation methodologies, devised for the 20th century firm and based on physical assets, which cannot accommodate intangibles easily."

Moreover, the market is proving a slow learner: stock analysts' under-appreciation of the effect has been even more pronounced since 1998 than it was before, even though the visibility of the Best Companies list greatly increased with its first appearance in Fortune that year.