Poor Leadership Practices Cost You Money

In a recent webinar, Blanchard program director and senior researcher David Witt presented findings from his analysis of data from over 200 companies that have completed Blanchard’s “Cost of Doing Nothing” calculator.

The companies in this mix range in size from 10 employees to thousands of employees from across the globe, from dozens of different industries. What is startling is that – despite the vast differences in size, locale, and businesses – these companies share common issues driven primarily by poor leadership.

The High Cost of Poor Leadership

Dave reports that companies in this study average losses of $1,000,000 annually driven entirely by the impact of poor leadership. Let’s look more closely at this data. The “Cost of Doing Nothing” calculator is built upon three desirable outcomes for companies: customer satisfaction, employee productivity, and employee retention.

The companies in this study described gaps in each of these key areas:

  • A 14-point customer service gap – organizations that completed the calculator determined that they were operating at a 75% positive customer satisfaction rate. Their desired positive customer satisfaction rate was 89%.
  • A 16-point employee productivity gap – companies in the study reported a 70% employee productivity ranking yet they desired an 86% employee productivity target.
  • A 45-point (!) employee retention gap – companies reported average employee turnover at 62%. The desired maximum employee turnover target for these organizations was 17%.

What is hopefully apparent to you as you look at these three desirable outcomes – customer satisfaction, employee productivity, and employee retention – is that each of these is highly driven by individual employees choosing to apply (or not apply) their discretionary energy.

Leaders have a HUGE impact on employee discretionary energy. When leaders demonstrate these proven behaviors, discretionary energy soars:

  • Trust and respect
  • Listening skills
  • Relationship skills (they get along with others)
  • Frequent recognition and celebration of staff effort & accomplishment
  • Hold themselves and their staff accountable

One more benefit of the above behaviors – when employees are treated this way, they have an easy time treating their customers the same way.

Leadership Effectiveness Creates Positive People, Passion, & Performance

Blanchard’s experience and research indicates that most organizations operate today with a 5-10% productivity “drag” that more effective leadership practices can eliminate. In one of our client organizations, analysis revealed that the company achieved a 5-12% increase in productivity among direct reports of managers who attended Blanchard’s leadership development program and began using the new skills they had learned.

Imagine the positive impact that consistent effective leadership behaviors can have on your organization’s people, passion, and performance!

Leadership effectiveness doesn’t happen casually. Organizations must be very clear about their strategy (vision, values, focus) then ensure leaders, managers, and supervisors consistently educate, delegate, inspire, cheer, and challenge their staff to make that strategy come to fruition. When leaders value and honor the contributions their team members provide, traction and momentum towards service, productivity, and retention occurs.

What is your experience with the impact of effective (or not so effective) leadership in the workplace? Add your thoughts in the comments section below.

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