The costs of poor leadership may seem best manifested in terms of the success or failure of an undertaking. According to Forbes, 95% of product launches fail. Bloomberg states that 80% of first-time businesses go bust in the first 18 months, and IBM Research shows that 60% of IT Projects fail within the first year.
However, the true costs of poor leadership do not manifest themselves in absolute terms, i.e., bankruptcy vs. survival, but rather disguise themselves in all sorts of little inefficiencies that pass almost unnoticed on a daily basis.
Although staff turnover costs are huge indeed (research about the true costs of staff turnover range from 16% of salary for hourly employees up to 213% for executive leaders), these pale in comparison with the costs of lack of employee engagement, mostly in terms of inefficiencies throughout the organization, i.e. bureaucratic procedures.
Studies conducted all over the world during the past six decades have shown a major trend in employee disengagement. In 2016, the majority of staff (up to 90%!) are disengaged in one way or another. In the USA that figure is said to be around 30% but, in my experience, is above 60%, and with associated costs of more than one trillion dollars per year!
The importance of employee engagement is directly linked to the efficiency of the organization in terms of producing, manufacturing and/or servicing. The higher the efficiency, the lower the costs and the greater the utility margin.
Hence, employee engagement should be the number one priority of top management.
Yet, most top management executives seem to feel completely incapable of bringing about sustainable employee engagement. Thus, relying on “experts” who only create resistance, to begin with, and cost a fortune in fees.
Most of top management executives seem too focused on the tree trunk right in front of them, failing to see forest of inefficiencies throughout the organization!
But even good leaders can only do so much. According to a Harvard study by Jack Zenger and Joseph Folkman, good leaders can achieve only up to 50% employee engagement, and great leaders up to 80%.
Even though good and great leadership achieve higher employee engagement, this is not enough in today’s competitive environment.
Sustainable employee engagement is directly linked to the shared Vision of the organization’s leader, transparency, and moral authority.
The more a worker understands and believes in that Vision, the greater her/his engagement and commitment is, and vice-versa.
Intelligent leadership, thus, includes being able to share and communicate that Vision throughout the organization. But for this to really happen, the right organizational structure must be in place.
An intelligent leader must be fully aware of the alternative to the restrictive organizational structure i.e., bureaucracy, deliberately-designed to restrict human behavior for total control.
An intelligent leader must not fall for “new & improve” methodologies, that only transform the appearance or “phenotype” of the organization.
An intelligent leader must ensure the complete transformation of the organization’s “genotype,” its DNA, into an expansive, employee-engaging one. Thus, having happier, fully empowered and engaged, more productive, and above all, more efficient staff.
More efficient staff translates by default to more satisfied customers, lower operating costs, and higher company revenue.
Most people know by now that “Culture eats Strategy for Breakfast.” Few seem aware, however, of the fact that Organizational Design Principles eat Culture for Lunch!
Now, the question is: what are you having for dinner as an intelligent leader?
JC Wandemberg Ph.D.
President & Founder
About the author: Dr. Wandemberg is an international consultant, published author, stocks trader, professor, and analyst of economics, management, marketing, human behaviour, environment and politics. For the past 30 years Dr. Wandemberg has collaborated with corporations, communities, and organizations throughout the world, to integrate sustainability through self-transformation processes and Open Systems Design Principles, catalyzing a culture of Trust, Transparency, and Integrity.