Pay Up! The Cost of Poor Leadership

Jan 30, 2018 | Business Tips, Knowledge Center, Leadership

If you have ever been on a team led by a lousy manager, you know the impact it can have on an organization. Not only does poor leadership have the potential to cost a business everything from a financial standpoint, it can also strongly affect the health and well-being of the staff. Knowing this, organizations across the globe spend over $100 billion a year on leadership training and development.

What are you doing to eliminate the risk of poor leadership? Are you distributing managers reviews? Surveys? Listening to employee concerns? If you are ignoring employee feedback, you are not doing your organization any favors. Good news – I’m here to help! Below I have detailed three costly risks that stem from poor leadership: staff turnover, missed deadlines and a toxic culture.

Staff Turnover

You have probably heard the phrase “employees don’t leave companies, they leave managers.” Sadly, this is true for a lot of people. The problem is, many leaders start out as an entry level high performer and get promoted until they land in a management position, typically without any evaluation of the skills necessary. Someone may be great at managing a product or project, but people management is another story.

What types of leadership behavior would make an employee want to leave? Employee alienation, inability or unwillingness to share knowledge, unapproachability, and the list goes on. The health issues caused by stress also plays a big role. Not only does stress shift our brain towards anxiety or depression, it also wears down our immune system. Unfortunately, this doesn’t just impact individual employees as negative thoughts can spread throughout the organization and even back home to families.

25% of employees leave their company due to lack of empowerment from their leader. This means poor leadership may push a quarter of your staff out the door. On average, turnover costs $5,500 per employee, leaving a company of 250 people with over a quarter of a million dollars in cost. Turnover is inconvenient, inhibiting, and costly, so if your organization is lacking effective leadership, locate the source of the problem and face it head-on.

Missed Deadlines

Productivity is the most impactful way leadership helps or hinders the bottom line. Poor leadership impacts employee satisfaction, which then impacts employee productivity. The purpose of leadership is to be a resource for employees throughout an initiative. If one project is not completed on time or within budget, the projects following are affected.

While “micromanagement” is not advisable, the senior manager needs to understand the progress of each project. Providing frequent updates and feedback will allow for more accurate expectations. An effective manager should be able to provide encouragement, feedback, and support to ensure their staff is completing assigned work on time and with intention.

A consequence of poor leadership is failure to inspire employees to deliver their best work and meet their potential. In order to achieve this, employees need to be committed to the organization and to the fulfillment of goals. Without a supportive culture, financial goals are likely to be missed.

Toxic Culture

Poor leadership impacts culture negatively in a number of ways, but the first has to do with lack of vision. Without any direction, employees will not know the goals of the company or why there are specific processes. If this is the case, they will accomplish goals mechanically without any intelligent direction.

The development of synergy is also affected by poor leadership examples and may result in divided departments. A good leader will communicate with employees regularly to provide a range of information relevant to their work. Encouraging staff to share ideas and engage in open discussions benefits the company and ensures everyone is on the same page.

It all starts from the top. Middle managers will start to adapt to the leadership tendencies of their superiors until it flows down the totem pole, eventually becoming the culture throughout. This routine leads to low morale with employees feeling misdirected or uncertain. Avoid a culture of mediocrity by focusing on effective communication and positivity.

In summary, Howard Schultz, CEO of Starbucks, said “You have to be honest and authentic and not hide. I think the leader today has to demonstrate both transparency and vulnerability, and with that comes truthfulness and humility.” Better leadership leads to better engagement, a happier and more productive staff, and satisfied customers.


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