We like leaders who are humble, attentive, available, almost therapeutic. They listen, support, and develop employees. But does this leadership style also help a company make money? In an article published in the Journal of Organizational Behavior, Therese Egeland, Alexander Madsen Sandvik, Vidar Schei, and Claudia Buengeler show that servant leadership may come at a cost, especially when it weakens the performance climate too much.
In a field study, the researchers followed 120 small Norwegian accounting firms, combining employee responses, leader responses, and public financial data. Employees assessed servant leadership and the firm’s motivational climate. Six months later, leaders assessed helping behaviours among employees. Financial performance, measured by return on assets, came from official registries, while controlling for past performance.
They found that servant leadership was associated with a mastery climate, focused on learning, collaboration, and improvement, which predicted more helping behaviour. But it was also associated with a weaker performance climate, focused on standards, comparison, and achieving results. That performance climate, in turn, predicted stronger financial performance. The indirect effect of servant leadership on financial performance was therefore negative, through the weakening of the performance climate.
It is worth noting, however, that autonomy changed the picture. When autonomy was high, the performance climate no longer really predicted financial performance. When autonomy was low, it became much more useful. In other words, the more latitude employees have, the less the company seems to depend on a climate centred on comparison and visible results. The conclusion is that a good relational climate does not replace clear expectations. But clear expectations do not always have to take the form of constant competition.