How Charismatic Leaders Increase Labor Productivity

Productivity is basically defined as the measure of “the output from a production process per unit of input”. In labor, for example, it is typically a measure of “output per labor-hour.” One area of great concern to industrialists and capitalists is related to labor productivity and the impact of the many factors around it – workplace practices, the advent of computers, capital infusion, education and training, and many others.  The main reason is the fact that while the impact of human capital investments on the workers’ wages had been studied extensively, there had been little information on the direct effect of human capital on productivity. The task of charismatic leaders is to inspire employees to raise their hourly input, which raises corporate profitability.  Measuring the impact of charismatic leadership on productivity is challenging to quantify, but may be better measured qualitatively.

Labor productivity

To date, however, there had been new studies conducted and published. These studies examined the link between labor productivity and a variety of workplace practices, capital and computers, both in the manufacturing, and non-manufacturing sectors.  In the conducted studies, the other issues factored in included the size and age of the business, material inputs, capital stock, workers’ experience, and capacity utilization.   

Findings 

The studies were done to check the factors that determine labor productivity for a given period, employee competency, equipment, and workplace practices. They also included computer use, human capital investments, high performance work systems, profit sharing, and recruitment practices. One standout data, however, showed that increasing the educational level of employees by at least a year increases productivity as well. (8.5% in manufacturing and 13% in the non-manufacturing sector).  Under the charismatic leadership model, researchers note the emotional inspiration endowed by employees when a charismatic leader is at the helm. In this sense, employees are not mere worker bees, but part of an overarching mission that has been clearly stated and each employee is aware of his individual contribution.

Training and decision-making

Studies demonstrate that formal training (done offsite, meaning from schools etc.) increased productivity in manufacturing. Computer savvy also enhanced productivity, especially in the non-manufacturing sector (sales, services, etc.). Other findings include that unionization or employee participation in decision-making also raised productivity. Also, it was found out that TQM (total quality management) system did not have much significant effects on productivity. Rather, it was raising the proportion of workers in making decisions in the work place (regular meetings, etc.) that showed a positive impact on labor productivity. In addition, investments in education and training generate higher productivity. Moreover, it promoted higher wage growth. Studies have shown that raising the workers’ educational level resulted in approximately 8 to 13% higher labor productivity.  Charismatic leaders encourage high employee participation and self-development for the good of organizational objectives. The belief that employees acting in their own self-interest for a greater quality of life will not only increase corporate profits, but encourage employees to become more competent “knowledge workers.”

Profit-sharing 

In manufacturing plants with profit-sharing schemes for non-managerial workers, there was a 7% higher labor productivity shown compared with their competitors in the same field. Those with R & D (research and development) had an average 6% increase.  In effect, the studies showed that profit-sharing extended to non-managerial employees had increased productivity more than what the profit-sharing scheme with managerial workers did. In short, the more “skin in the game” for employees, the greater the buy-in. Charismatic leaders encourage personal ownership of a mission. Ownership and performance based compensation is the hallmark of charismatic leadership.  The greater the productivity of the employee, the greater the inducement for charismatic leaders to encourage corporate ownership. In a global economy, where employees act as “free agents,” knowledge workers have to be provided greater incentives to keep from taking their talents elsewhere.

For more information on increasing productivity under the Charismatic Leadership model, visit: Charisma