The Cost of Poor Leadership

Business Man Drawing Leadership Concept on Chalkboard

If you could do one thing, just one thing, that would improve your organization, increase sales and profitability, lower turnover and create a more engaged workforce, would you?

There is such a thing. It’s called leadership. And the studies show that more than anything we can do for our organizations, building better leaders makes a positive difference.

First, let’s look at the cost of poor leadership.

According to a major study by the Blanchard corporation, poor leadership costs companies an average of 7% of sales. What else can you do to increase your sales by 7%
Depending on the company, better leadership could reduce turnover anywhere from 9% to 32%. Consider the cost of hiring and training new employees and executive and that’s a serious drag on profits.
according to Gallop’s American Workplace report, only 30% of employees are truly engaged in their work. 50% are just going through the motions and 20% are so down on their leadership that they are a negative influence in the workplace. Gallup estimates that last 20% alone costs organizations about half a trillion dollars a year. The biggest complaint? Poor leadership.

Poor leadership has been shown by groups ranging from Gallop to Harvard Business Review to show up in a myriad of ways:

  • Staff turnover costs
  • Missed deadlines
  • Failure to meet goals
  • Poor communication
  • Reduced Morale
  • Missed opportunities
  • Decreased efficiency
  • Increased conflict

All due to the lack of one skill: Leadership.

There is a popular myth that leaders are born. And it’s true that some people just seem to have “it”, that mix of charisma and skill that makes people want to perform well for them. But it is just as true that leadership can be taught. It can be learned. Introverts and extroverts can make good leaders. Everyone can become a good leader.

Becoming a leader, or developing leaders is not a matter of just taking a class or reading a book. Each person in our organization brings different strengths and proclivities that can be developed into strong leaders, but to do it well, it takes individual coaching, the ability to work with that person, that manager, that project manager, that executive to build around their individual strengths and weaknesses to make them the best leader possible.

Teaching leadership is not the same as teaching management. Management is about skills, numbers, goals and such. Leadership builds on management, inspiring and motivating people to be their best.

Some organizations understand this. They have built in-house teams that constantly coach and build up their people’s leadership skills. Other organizations invest in hiring leadership trainer/coaches for their most promising and most important people. Either way, they grow leaders, and they reap benefits that can be measured both in terms of money, and in terms of a more inspired workplace.

Other organizations limp along with a mix of natural born leaders, and poor leaders. And these organizations? They pay the costs outlined in this article.

The cost of poor leadership is known. And so is the cost of investing in leadership development. Studies have consistently shown that investing in leadership development coaching, whether it is internal or external, pays back a return ranging from 200% to over 700%. That’s right, a return on investment. There is no long term cost to investing in leadership training/coaching. There is only payback.

Which brings me back to my original question: If you could do one thing, just one thing, that would improve your organization, increase sales and profitability, lower turnover and create a more engaged workforce, would you?

Be well. Travel wisely,

Tom

Business Man Drawing Leadership Concept on Chalkboard
Business Man Drawing Leadership Concept on Chalkboard

 

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