There are some executives that like to look at academic journals but unfortunately, the crossover literature has not reached them enough. I attempt to blend scholarly concepts with real-world applications. For the executive’s corner, I place a great deal of emphasis on the literature of leadership and information technology as two significant indicators for financial performance. This article adds to a relatively small body of literature but pays homage to the scholarly contributions. I highlight the direct impact of leadership on financial performance, and also simultaneously portray the indirect contribution of leadership in improving organizational outcomes by implementing information technology as another important component of organizational performance. This article actually investigates the crossover potential of scholarly research and how it can be applied in the organizational boardroom.
Executives will also see that cultivating effective technological initiatives requires developing leadership within companies—not only at the higher echelons of the company but at every level. In light of the increased pressures of the global workplace that inspires executives to exert effective change at the organizational level, this article points out the vital importance of leadership in reshaping and, in some cases, manipulating a company’s internal resources to have access to higher performing technology within firms.
The focus of this article is based upon the critical role of leadership which allows a rich basis for understanding the mechanisms by which knowledge management and financial performance are influenced. Scholars repeatedly uncovered leadership impacts on knowledge management and financial performance. This article articulates a different approach. I simply extended the current literature by showing how executives can contribute to knowledge management and financial performance by fostering effective technological platforms. These two factors coupled with leadership are presented as a new approach for executive implementation.
I also suggest that executives embrace leadership. Leadership influences some of the spans of control of executive responsibility. My primary focus is on one factor (i.e. information technology) but there are many more important components of the managerial function that can be enhanced when leadership is embraced. The key here is that there are positive effects of information technology on knowledge management and financial performance.
Executives will also see that I expand upon the subject matter of a company’s internal resources. Through articulating the impacts of leadership on information technology, I add to the current and extant literature. Insufficient consideration of the impact of leadership on the companies’ internal resources has been exposed and I attempt to address this concern for the first time. For executives, this article can portray a more detailed picture of the effects of leadership on information technology, knowledge management, and financial performance that have been mentioned but not placed in a model in the past.
Leadership and Information Technology
The only thing we know is technological change is on the rise. With the inception of new technology, while services become obsolete so quickly today, executives are staid with managing the future that is somewhat evasive.
Executives can develop relationships and interactions within companies, set desired expectations, and inspire employees to identify further opportunities in their business environment. When executives view information technology as a vital important organizational resource that facilitates organizational communications and improves the search for knowledge, they begin to see opportunities for successful business ventures.
Executives also spend a great deal of time conceptualizing strategic endeavors. Scholars affirm that the strategic role of leadership is enhanced when the implementation of information technology successfully occurs at the right time and place. Thus, executives raise the levels of awareness on the importance of technology and empower employees to improve the effectiveness of information technology implementation within corporations. Therefore, executives can positively affect information technology implementation within companies. Executives must understand that leadership can highly support information technology to improve knowledge management and financial performance and, therefore, remain competitive.
Leadership and Financial Performance
Executives develop organizational communications aimed at providing valuable resources for all employees. Thus, executives can enhance knowledge sharing among employees and stipulate knowledge to be shared around the company. Sharing the best practices and experiences could positively impact some aspects of organizational performance such as innovation, providing learning, and growth opportunities for employees. Empowered employees can also enable a firm to actively respond to environmental changes and collective-interests. The key idea is to identify employee’s needs and show concern for both organizational needs and employee’s interests concurrently.
When executives show concern for the employee’s individual needs, individuals begin to contribute more commitment and they become more inspired them to put extra effort into their work. This extra effort improves the quality of services, customer satisfaction, and impacts the return on assets, sales, shareholder value, and improves operational risk management.
Executives can also inspire employees by setting highly desired expectations. The higher level of follower expectation can enhance productivity and perhaps decrease organizational costs. Scholars agree that executives positively affect financial performance through improving the price of stock, decreasing costs, increasing sales, improving innovation, increasing the rate of responses to environmental changes, improving the quality of services, along with a stronger customer focus and developing learning opportunities for employees. Thus, leadership is positively associated with companies’ financial performance.
Information Technology and Financial Performance
Information technology significantly contributes to corporations’ financial performance. Scholars acknowledge that information technology is an important enabler to effectively implement organizational processes. Communication technologies can, in fact, reduce paper-based transactions for companies that can potentially decrease costs and subsequently improve profitability for companies. Furthermore, it can be seen that communication technologies contribute to companies to effectively identify opportunities in the business environment that leads to identifying the best opportunities for investment in the industry that potentially leads to improve financial performance for companies in terms of return on investment (ROI).
Decision-aid technologies as another kind of information technology can also help companies to effectively create more innovative solutions for their organizational problems. Executives can, therefore, build a high-performance company through implementing information technology.
Information Technology and Knowledge Management
Information Technology is the new competitive advantage, and the companies that embrace it will survive while those that do not will find their companies facing possible acquisition. Information technology is a resource for knowledge management. With knowledge management, executives can sustain current operations while preparing future endeavors. Information technology, as a competitive resource, encourages employees to embark on technological facilities such as shared electronic workspaces to provide new ideas and possible solutions for solving problems. Problems that may leave a company to debunk and less competitive.
Scholars found that the lack of innovative workplaces adversely impacts on the company’s capability to manage knowledge, and they suggest that companies use information technology to successfully facilitate knowledge management. Information technology plays a critical role in managing knowledge by executives and is also aligned with the knowledge-based view of the firm which not only builds upon the dissemination of information but also how it is restored and retrieved.
The following figure provides a snapshot of how executives steering information technology enhances goal achievement.
Some Lessons for Executives
This article theorizes that leadership has significant effects on information technology. It follows that cultivating effective impacts on information technology is assisted by developing leadership within companies. The practical contribution of this article lies in explaining how executives influence information technology.
This article suggests that information technology constitutes the foundation of a supportive framework to improve knowledge management and financial performance. In fact, it can be argued that if information technology is not completely supportive of knowledge management, companies cannot expect to benefit fully from knowledge management projects. Both in theory and in practice, information technology is depicted as an important enabler for knowledge management and financial performance.
Scholars noted that a strong alignment exists between the success of knowledge management projects and information technology implementation and found that knowledge management projects are more likely to succeed when companies develop and use broader technological infrastructures. This article goes further and provides elaborative insights for executives by modeling how information technology mediates the relationship between leadership, knowledge management, and financial performance.
This article reveals that executives actively deploy this organizational resource (i.e. information technology) to improve knowledge management, and it is quite understandable that leaders are better suited to enable knowledge management projects within companies through channeling knowledge management efforts into employing supportive information technology. Therefore, this article suggests that it is critical that executives understand that leadership supports information technology implementation to effectively manage knowledge management projects.
Mostafa Sayyadi works with senior business leaders to effectively develop innovation in companies and helps companies—from start-ups to the Fortune 100—succeed by improving the effectiveness of their leaders. He is a business book author and a long-time contributor to business publications and his work has been featured in top-flight business publications.