The Double-Edged Sword of Servant Leadership: Motivational Climates, Helping Behavior, and Financial Performance

Abstract

Research on the effects of servant leadership on firm success has yielded inconsistent results. Connecting servant leadership theory to achievement goal theory, we theorize that servant leadership exerts both beneficial and detrimental effects on firms by shaping two distinct motivational climates: mastery climate and performance climate. These climates, in turn, serve as mechanisms linking servant leadership to two complementary dimensions of firm success: relational outcomes (firm helping behavior) and performance outcomes (financial performance). We tested these assertions using a two-study design comprising an experimental study with 99 simulated firms working for a fictitious leader (Study 1) and a multisource, time-lagged field study of 120 small firms and their leaders (Study 2). Study 1 demonstrated that servant leadership strengthens firm mastery climate and weakens firm performance climate relative to a control condition (directive leadership). Study 2 revealed that servant leadership was positively related to firm helping behavior mediated by firm mastery climate but negatively related to firm financial performance mediated by firm performance climate. This negative indirect relationship was moderated by autonomy in the firm, which weakened the positive effect of firm performance climate on firm financial performance. Our findings clarify both the benefits and pitfalls of servant leadership for firms, highlighting that its relational advantages may come at the expense of financial outcomes under certain conditions. This research contributes to a more nuanced understanding of when and how servant leadership is advantageous for organizational success.