Tuesday, October 9, 2007

The cost of poor leadership

Often times fortune 500 companies spend close to an average of $2000 to $8000 or more per non managerial employee for on boarding. Then depending on the position, there a "ramp up" period before the employee actually becomes profitable for a company. I would argue, no matter how much money you spend on an individual, if the company or even office culture is not equal to the standards of talent resides in those desks, you will not keep your talent. From financial incentives, benefits, training and daily operational costs, its no wonder why companies spend in the millions of dollars to maintain their human capital. Employee turnover, especially before you recoup the investment is a huge problem. The direct costs to your bottom line of employee turnover can cripple your business. Think of what it costs you to recruit, train, and get a new employee up to speed. Although the actual cost may vary depending on the job or industry, the cost per new hire can average $2000 to $8000. Even if you only turnover 10 employees per year, that is $20,000 to $80,000 off of your annual profits. This doesn't even take into consideration the indirect costs listed below. Turnover adds to indirect costs as well. It effects employee's morale, on the job injuries due to lack of personnel or lack of experience, customer relationships, productivity of other employees and increased theft.

Corporations answer to the increasing problem of turnover? Let's hire a consultant, let's fire the bottom feeders, let's spend more money on leads, basically, let's through money at it and the problem will go away. That no better works for my four year old than it works for my employees. The true solution is to take a good look at our company culture and ask the question to the management team, "Is Leadership important?" I would like to know from you... remember, I chose you to learn from this group... your input is valuable...



Having considerable experience with several radically different corporate cultures, I feel that I have fully experienced the power and value of good leadership.

There is no replacement for the attitude and loyalty that a good leader can bring out of his people. Nothing will save more money, make more sales and raise your company to the top of your industry’s ladder like good old fashioned leadership. I am talking about hands on involved leaders getting to know the people and the processes with which they work each day, and guiding them with wisdom.

Nothing will cost you more money, lose more sales and drop your company to the bottom rung of your industry’s ladder like poor leadership. Now, I am talking about the “It’s all about me, I’m the boss, do what I say-not what I do” blowhard that worked his way to the top by being the loudest and possibly the “Best Producer”…using the people assigned under him until they are deprived, dissatisfied and defeated. Or a passive tailcoat-riding pleaser too worried about rocking the boat to share any wisdom and insight that he might have to offer.

Let’s protect our morale, protect customer relationships and protect the productivity of other employees. We need to decrease on the job injuries due to lack of personnel or lack of experience, and decrease theft and turnover. Take a deep look at who is leading departments of your company, and if your company is currently doing well, you may be pleased at how well you chose your leaders.

Thanks for bringing up a great topic Christian!

Kent Vorkink said...

I'm glad that you've decided to write about leadership and your thoughts here are very insightful. Recently I was at a crossroads and decided to take a position with a large corporation in part because I liked the regional manager who was based in Chicago. Unfortunately, the local management had poor leadership skills and I quickly retraced my steps and took another road. Leadership has to be learned and practiced and merely being a supervisor does not imbue one with the requisite leadership skills for the job.

Roland Palm said...

This is a very good definition of leadership: A leader is one who conducts, precedes as a guide to others in action or opinion, one who takes the lead in any enterprise or movement, one who is ‘followed’ by disciples or adherents, the most eminent member of a profession, a person of eminent position and influence, the first person in a file, one in the front rank. "Can the blind lead the blind? Shall they not both fall into the ditch? The disciple is not above his master, but everyone that is perfect shall be as his master."

madhatter_y2k said...

well as in the view of Goleman the author of Primal Leader, leadership matters because a good leader creates what is known as resonance which makes him/her very effective.

Resonance which come from the latin word resonare. Meaning creating sound however when applied to leadership simply describes as effective leader who is attuned to others people's feelings and move them in a positive emotional direction. They speak authentically about their own values, direction and priorities and resonate with the emotions of surrounding people. Under the guidance of an effective leder, people feel a mutual comfort level. Resonance comes naturally to people with a high degree of emotional intelligence (self-awareness, self management, social awareness and relationship management) but also involves intellectual aspects.

Simply put: Since people want to be led; and they want leaders with human values and respect for people's unique talents and the contributions they can make and also employees want leaders who will create an environment that nurtures excellence, risk taking and creativity . They need a leader that creates resonance, which in turn promotes excellence, risk taking and creativity amongs employees.