The Importance of Leadership Assessment

Wise, long-term investors recognize that leadership matters. In research conducted by consulting firm, RBL Group, investors were found to allocate about 30% of their decision making on the quality of leadership. Quality of leadership predicts intangible value which, in turn, produces financial results. But too often assessments of leadership are haphazard and narrow. Investors may say “this leader is charismatic, has a vision, or treats people well” but there is little analysis behind what has become a “gut feel” approach to leadership assessment among many investors.

In recent years investors have learned that defining the market value of a firm is based on much more than just earnings. For decades, the Financial Accounting Standards Board (FASB) have required financial reporting of earnings, cash flow, and profitability as generally accepted accounting principles (GAAP).

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Written By

Dr. David (Dave) O. Ulrich, PhD, is Rensis Likert Collegiate Professor of Business Administration and Director, Human Resource Executive Program, University of Michigan. He is also a Partner, the RBL Group.

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