Managers whose words match their deeds have a positive effect not only on morale but on their company's bottom line, according to a study by a Cornell University researcher and his colleague. Conversely, managers who lack such integrity lower profits, the researchers found.

Tony Simons, an associate professor at Cornell's School of Hotel Administration, and Judi McLean Parks, a former Cornell instructor who is now a faculty member at Washington University's Olin School of Business, surveyed more than 6,500 employees at 76 U.S. and Canadian Holiday Inn hotels to come up with their findings, which are being published in the September 2002 issue of Harvard Business Review.

"Everyone knows that leaders have to 'walk the talk,'" writes Simons. "Think of the manager who hangs 'customers come first' placards in every department and a month later cuts the customer service staff. He may have a good reason for the layoffs – or no choice – but he's sabotaged his staff's trust, and there will be a price to pay."

Simons and Parks proposed that when employees observe what their bosses say correlates with what they do, their trust increases, they become more committed to the organization and more willing to go the extra mile. That, in turn, leads to improved customer satisfaction, less employee turnover and greater profitability. The researchers also suggested that the effect might work in the opposite direction, with managers who showed a lack of integrity leading to lowered profits.

To measure these expected chain reactions in a competitive service market, they asked the Holiday Inn employees to rank, on a five-point scale from strongly disagree to strongly agree, how closely their managers' words and actions were aligned, evaluating statements such as "My manager delivers on promises" and "My manager practices what he or she preaches." The survey also gauged employee commitment and the service environment at their organizations with statements such as "I am proud to tell others I am part of this hotel" and "My coworkers go out of their way to accommodate guests' special requests." Simons and Parks then linked the responses with customer satisfaction surveys, personnel records and the hotels' financial records to come up with their results.

"The ripple effect we measured was much stronger than we had imagined," said Simons. "Hotels where employees strongly believed their managers followed through on promises and demonstrated the values they preached were substantially more profitable than those whose managers scored average or lower." So strong was the link, said Simons, that a one-eighth point improvement in a hotel's score on the five-point scale could be expected to increase the hotel's profitability by 2.5 percent of revenues. In the researchers' study, that translates to a profit increase of more than $250,000 per year for an average-sized hotel.

"No other single aspect of manager behavior that we measured had as large an impact on profits," observed Simons. "Given the high cost of behavioral missteps among a company's managers, it's simply good business to make consistent words and deeds – behavioral integrity – an ongoing priority."