Poor leadership costs average organization over $1 million dollars annually

A new white paper from The Ken Blanchard Companies shows that poor leadership is costing the average company an amount equal to 7% of their annual revenue. That’s over a million dollars a year for any organization with $15 million dollars or more in annual sales.

 The three big culprits? 

  1. Employee turnover.  Poor leadership is responsible for up to 30% of the reasons why people leave their organizations according to exit interviews conducted by The Saratoga Institute.
  2. Customer turnover. Poor leadership negatively impacts employee satisfaction, which in turn negatively impacts customer satisfaction and retention. Research published in Harvard Business Review calculated that every 5 point change in employee satisfaction scores caused a 1.3 point change in customer satisfaction scores.
  3. Employee productivity.  Poor leadership leads to poor employee productivity.  Research from Blanchard shows that direct report productivity can be improved 5-12% through better management practices. 

Most senior executives instinctively know that leadership impacts the bottom line, but quantifying that impact has been a challenge in the past.  This new white paper (and the free online calculator that the information is drawn from) is a great way for leaders to put some facts behind their suspicions. 

You can download a copy of this new white paper, Making the Business Case for Leadership Development: The 7% Differential here.  If you are interested in calculating what poor leadership practices might be costing your organization, also check out Blanchard’s free online Cost of Doing Nothing Calculator.  This is the same free online calculator used by survey respondents in the white paper.


10 thoughts on “Poor leadership costs average organization over $1 million dollars annually

  1. Was discussing this same topic with some friends, not only is it a leadership issue, it’s an Human Resource issue. If you’ll notice, poor companies rely on tasks by the people, not the talents of their people. The book “Strengths Finder” is talked about by all of my entrepreneurial friends, we each compare what our strengths are to know where we all fit best.

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