The Financial Impact of Poor Leadership—and 3 Ways to Improve It

bigstock-businessman-and-line-down-47325232Good leaders bring out the best in their people.  Bad leaders diminish performance.  When you add up the costs over an entire organization, the bottom line impact can be staggering—an amount equal to 7% of a company’s sales according to responses from people at 200+ companies who have used The Ken Blanchard Companies Cost-of-Doing-Nothing Calculator.

That analysis found a 14-point customer satisfaction gap, a 16-point employee productivity gap, and a 45-point employee retention gap which translates into over $1 million dollars for the average organization.

In looking at the ways that leadership impacts each of these three areas, separate Blanchard research into the Leadership-Profit Chain and Employee Work Passion has found that better day-to-day operational leadership practices—including those that promote autonomy, collaboration, connectedness, and growth can significantly improve employee intentions to stay with a company, perform at a high level, and apply discretionary effort in service of company goals.

Taking some first steps

Looking to identify and address operational leadership in your own organization?  Here’s a three step process for getting started.

  1. Double-check on goal alignment at the team and department level.  Make sure that all team members are working on the highest priority tasks.  Ask managers to check in and review priorities with their people.  Make sure the work is meaningful, on-target, and contributing to overall organizational goals.  You’ll be surprised at the amount of misalignment that occurs over time.
  2. Identify what people need to succeed at their high priority tasks.  Depending on their experience and confidence with the tasks they are assigned, people can be Enthusiastic Beginners, Disillusioned Learners, Capable, but Cautious Performers, or Self Reliant Achievers.  Each of these development levels requires a different style of leadership—either Directing, Coaching, Supporting, or Delegating.  (Surprisingly, without training only 1% of managers are skilled at identifying and being able to deliver all four styles when needed.)
  3. Make sure managers meet with their people on a regular basis.  While it is always best for managers to be able to adapt their leadership style to perfectly meet employee needs, that doesn’t mean that they should put off meeting on a regular basis to review goals and provide direction and support as best as possible while learning.  Even if managers aren’t perfect, people still appreciate a chance to talk, discuss progress, and ask for help.

Begin today

Academic research has established a strong correlation between leadership practices, employee engagement scores, and subsequent customer satisfaction scores.   The bottom line is that leadership practices matter. Encourage your leaders to review goals with their people, identify how they can help, and set up a regular time to review progress.  Take care of the people who take care of your customers.  It’s good for them—and your business too!

Interested in learning more?  Join me for a free webinar!

On October 30, I am going to be presenting a more in-depth look at the Cost of Doing Nothing analysis and sharing some strategies for addressing it.  This is a free webinar courtesy of Cisco WebEx and The Ken Blanchard Companies.  Over 500 people are registered and I hope you’ll join us also. Use the link below to learn more.

High Potential Leadership: Three Strategies to Boost Your Bottom Line

You’ll learn that:

  • Less-than-optimal leadership practices cost the typical organization an amount equal to as much as 7% of their total annual sales
  • At least 9% and possibly as much as 32% of an organization’s voluntary turnover can be avoided through better leadership skills
  • Better leadership can generate a 3 to 4% improvement in customer satisfaction scores and a corresponding 1.5% increase in revenue growth


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