Recent decades have witnessed a rapid growth in ‘managerialism’, outsourcing, and the use of business metrics. As part of this trend, many companies have started to hire generalist leaders who come from outside their industry. In doing this, organisations have turned away from a previous tradition of appointing highly qualified candidates who have worked their way up through that specific sector and who in that way acquired hard-won expertise within it.
During the financial crisis in 2008, two of the world’s largest banks, Halifax, Bank of Scotland and the US bank Citigroup, were led by CEOs with no banking experience or expertise. Both banks nearly crashed their respective economies and both had to be bailed out at huge expense by UK and US taxpayers.
Dr Amanda Goodall’s work demonstrates empirically the folly of placing non-core-business-experts into leadership and management roles. She shows that the current trend needs to be reversed – and urgently.
Dr Goodall’s research looks at the characteristics of leaders, and at the eventual performance of the company or other organisation that they lead, and tests whether there is a link between the two. Do generalist CEOs, for example, help a firm perform better? She shows they do not. She finds instead that organisations perform more strongly when the people at the very top are the ‘core business experts’. Dr Goodall refers to these individuals as ‘expert leaders’ – so named because they have deep expertise and experience in their sector.
Amanda Goodall’s ideas – driven by a great many empirical studies – are therefore at odds with much of current practice. That is why her iconoclastic work is today having a visible and fundamental impact.
Some of Dr Goodall’s newest and most general findings emerge from a collaboration with economists and management scholars in Denmark. Denmark is unusual in that it allows researchers to access the detailed records of every company and every individual in the country. Goodall and her colleagues exploit that. They examine 30 years of data on the profitability of all Danish companies and then inquire into the backgrounds of the CEOs who were in place in every year in the data set. Using statistical methods, it is possible to match up the leaders with the organisations at different points in time, and thus to see what kinds of organisational leaders produced in each year the highest rate of return on company assets. Not generalists who came from other sectors and not the accountants but instead, it was experienced men and women who had acquired the deep expertise that comes from decades within the appropriate industrial sector. In short, expert leaders dominate.
Dr Goodall’s longstanding work in healthcare has also been influential – not just in the UK but internationally. She was the first researcher to show that the ranked position of a US hospital, in the foremost US News and World Report Best Hospital ranking, was higher when led by a medically trained physician as compared with the position of a hospital when led by a non-medically trained general manager. In the top-100 hospitals in three medical specialties, her analysis found that hospital quality scores were approximately 25 per cent higher in physician-run systems led by doctors compared with those led by general managers. This study sparked debate in healthcare settings globally, is now highly cited, and has motivated a wealth of new research. It has also motivated Bayes Business School into creating the Executive Masters in Medical Leadership for doctors. Dr Goodall’s results have been replicated by many other researchers.
Further evidence demonstrating a link between expert leadership and organisational performance comes from Dr Goodall’s examination of the education sector. Using UK data over a ten-year period, for example, research-intensive universities were shown to improve in their research performance if they had been led, a number of years earlier, by a president who had been an active and strong researcher in their own academic career. Just like our own university President, Professor Sir Anthony Finkelstein, who is a distinguished engineer and computer scientist.
Why expert ‘expert leaders’ are the best leaders
Dr Goodall’s recent research has uncovered a significant relationship between the prevalence of expert leaders and higher employee job satisfaction, which is known to be tied to individual productivity. Employees are also less likely to quit if they are led by an expert boss. In a random sample of 35,000 UK and US employees matched to their firms, the single strongest predictor of job satisfaction was the competence of the immediate supervisor in the core business. This was measured in three ways: if the supervisor could do the employees’ job, if they worked their way up through the organisation or started it, and if employees perceive the supervisor to be competent. Within higher education, Dr Goodall found that university faculty were more satisfied with their job if they perceived their department chair to be a distinguished or highly distinguished scholar. This conclusion was replicated in four studies of doctors reporting on their line mangers in hospitals: job satisfaction was higher, and a desire to quit lower, was found among doctors who assess their manager to be an outstanding clinician.
Amanda Goodall argues that an expert line manager has their beneficial effect on employees principally through the informed way that they are able to manage, motivate, develop and inspire, and through the high-morale work environment that they create. Because the leaders themselves really understand the business, and were in all likelihood previously one of the skilled workers, those leaders have a genuine appreciation for how people should be treated and how places of work should be designed.
This is the way that deep expertise floods through from the person at the top onto different tiers in the organisation below. An expert boss is on the side of the employees – and those employees can tell. The employees also respect the technical ability of a boss who was once one of them. Plus an expert leader knows what kind of people are ideal to hire as managers at different lower levels within the organisation. That, in turn, creates multiple layers of expertise and bosses with empathy across the firm or organisation. Expert leaders can thus have valuable indirect spillover effects as well as having direct influence on daily strategic decisions made at the very top.
Expert leaders also have an emblematic role. An expert at the top of an organisation signals excellence like a quality beacon to potential new talent who are trying to decide whether to accept a job. Potential new hires, many of whom will be extraordinarily talented individuals who have been offered many alternative openings, know that an expert leader will expect high standards and also recognise the value of talent.
Amanda Goodall’s work has become known outside academia. Since completion of her PhD in 2007, Dr Goodall has given almost 100 public talks and has been invited many more times. Her talks are often to international audiences, including many keynotes to groups of organisational leaders, policy makers and politicians. She has appeared in news and other media globally and her work has featured on hundreds of different blogs and websites, including far-reaching podcasts such as for Harvard Business Review.
An example of where Dr Goodall’s work had demonstrable external impact is in South Australia Mental Health where in 2014, a South Australian Coroner released the findings from an inquest into the tragic suicide of a 15-year-old girl. The Coroner’s findings were critical of the care she received from the Child and Adolescent Mental Health Service (CAMHS). Dr Goodall’s research was used to make dramatic changes to the provision of services. South Australia (SA) has a public mental health budget of £200 million and the sector employs 2,500 full-time equivalent staff – managers, doctors, nurses, and allied health professionals. The SA government recognised that renewed medical leadership was required to transform the public mental health sector. As a consequence, psychiatrists were returned to executive leadership positions in SA Mental Health (citing Dr Goodall’s 2011 article in the journal Social Science & Medicine).
Another example is the case for medical leadership and motivating doctors to lead. Dr Amanda Goodall’s research has been endorsed by key people in healthcare including Professor Stephen Powis National Medical Director of NHS England who said, “Amanda Goodall has greatly influenced my thinking on medical leadership… Amanda is one of the UK’s foremost contributors to this area of research. This has two important consequences. Firstly, her research is growing the evidence base that medical leadership of healthcare organisations is correlated with improved organisational and thus patient (and health) outcomes…This is particularly important in the UK where there is a deficit of senior medic in key leadership positions such as NHS trust CEO roles. Second, she has used this research base to develop and provide teaching and training in this area.”