One of the unfortunate paradigms of company leadership is that the higher you go in the corporate structure, the easier it is to begin thinking that the human beings working for the company are cogs in a wheel. Replaceable parts. Numbers on a spreadsheet, headcount, resources, or my least favorite euphemism, human capital.
Once you begin thinking this way, you take your eye off of a very important ball: the quality of the leaders down the organization who lead those employees. It only takes a few well-placed bad leaders to create a toxic culture, and the hidden negative financial implications begin.
You might be thinking that a bad leader is someone who isn’t delivering results. But bad leaders are often the ones who do deliver the results. They just do so at the expense of all the human beings in their charge. If a leader delivers on their goals but their top talent resigns afterwards, most companies overly focus on the former while not noticing the latter. This is an expensive mistake.
Companies tend to lose revenue and increase expenses from having bad leaders in these three ways:
High turnover: A single bad leader can cause your highest performers (the ones with the most opportunity) to leave. These former employees will post a bad Glassdoor review on their way out as a warning to others. Those left behind must now do the jobs of those who left plus interview replacements for them. This causes burnout, missed goals, and quality issues. These, in turn, lead to more turnover and more bad reviews in a vicious circle.
Setting aside the very real and significant recruitment costs to find talent, companies with high turnover suffer an immense loss of productivity and quality that is felt by their customers. Before long, candidates are lower quality because talented people are noticing those bad Glassdoor reviews and not applying. When this happens long enough, companies begin failing to innovate.
Loss of innovation: The human beings working for you can either check the box and do the job or they can be thinking about solutions to your company’s problems in the shower. Which kind of workforce do you think would innovate more? Innovation is the lifeblood of any company. It doesn’t always mean making a new shiny product for your customers. Sometimes innovations are internal process improvements that speed up the delivery or improve the quality of your current products. But there’s no line item for “innovation,” and no measure for the lack of it. Your first notice of it may be when a competitor announces their latest product.
If you have talented, motivated team members then innovation is not guaranteed, but the probability is high. If you have dispirited, demoralized, disengaged employees because of a toxic leader, innovation is nearly impossible. A lack of innovation is a trailing indicator of poor leadership. By the time you notice it, it may be too late.
Loss of agility: No one had COVID on their five-year roadmap in 2018. Companies that pivoted quickly to adapt to the new reality are still here. Those who didn’t or couldn’t are not. When drops of poison are scattered about in your company, it is very difficult for it to pivot quickly. Doing so requires employees who sense the urgency, trust each other, have autonomy, and feel the fire of the company’s mission.
But poisonous leaders do not instill any of these. In fact, they often instill the opposite. Again, there isn’t a single line item on a financial report that says, “ability to pivot,” but dispirited and disengaged teams would score low on it if there was. Ultimately, the company’s agility, or lack thereof, is reflected in its most important number: the bottom line. It’s just that by then, it’s usually too late to fix it.
3 Ways to Protect Your Company
In the same way that just one drop of poison would make you sick over a long period of time, bad leaders slowly kill companies by preventing the kind of synergy they need on their teams to compete in the twenty-first century. Here are three strategies to help you keep your eye on the ball in terms of team engagement and morale as it relates to leadership:
- Include employee engagement as an important measurement for leaders.
Let leaders know that if engagement scores drop, that will be the thing you will be holding them accountable for. It’s more important than their group/team delivering on their work, but it shouldn’t be a zero-sum game. It is possible to lead a team to great results while having them stay engaged and motivated.
- Provide coaching for leaders who are struggling with engagement.
Bad leaders don’t wake up every day wondering How can I destroy my teams today? They’re usually just focused on meeting targets given to them and are leading in a way that makes sense to them without realizing that it’s harming team performance and long-term company outcomes. Many leaders were promoted because of their individual contributor performance but then are completely unprepared for the new skills they need. Provide coaching for leaders that instills a people-first mindset.
- Examine your incentives.
Bad incentives will make even good leaders behave badly. Take a good look at the company culture to see what incentives (monetary or political) may be influencing leaders to behave poorly. If your culture rewards people who use the skulls of their peers as rungs, you shouldn’t be surprised when you find yourself with a company full of Machiavellian ladder climber leaders willing to do whatever it takes to get promoted. All the coaching in the world won’t be able to change a leader if the culture they’re operating inside of rewards their bad behavior.
The negative financial impacts of bad leadership inside your company will not show up in financial reports in a way that you can easily trace back to poor leadership, but those impacts are very real. Don’t take your eye off the engagement of employees. It is a competitive advantage to be a company where talented people want to work and want to solve your company’s problems — in the shower or at their desks.
