Achieving Business Excellence with John Spence

The High Cost of Poor Leadership


I was recently asked by one of my clients to put together some statistics on the cost of bad leadership and the upside of excellent leadership. He needed this information so that he could help support an investment in hiring me to do an advanced leadership training workshop for his organization. I think that intuitively, most people understand that subpar leaders/managers obviously have a negative impact on the organization. However, when you look at how big the cost of poor leadership really is, then you begin to re-examine the importance of leadership development within the company. In order to review the high cost of poor leadership, I am sharing the information I sent to my client:

Poor leadership practices cost companies millions of dollars each year by negatively impacting employee retention, customer satisfaction, and overall employee productivity.

Evidence of the High Cost of Poor Leadership

According to research from the Blanchard Company:

  • Less-than-optimal leadership practices cost the typical organization an amount equal to as much as 7% of their total annual sales.
  • At least 9% and possibly as much as 32% of an organization’s voluntary turnover can be avoided through better leadership skills.
  • Better leadership can generate a 3-4% improvement in customer satisfaction scores and a corresponding 1.5% increase in revenue growth.
  • Most organizations are operating with a 5-10% productivity drag that better leadership practices could eliminate.

From other sources:

  • It’s a sad truth about the workplace: just 30% of employees are actively committed to doing a good job. Gallup’s 2013 State of the American Workplace report indicates that 50% of employees merely put their time in, while the remaining 20% act out their discontent in counterproductive ways, negatively influencing their coworkers, missing days on the job, and driving customers away through poor service. Gallup estimates that the 20% group alone costs the U.S. economy around half a trillion dollars each year. The single greatest cause for employee disengagement? Poor leadership.
  • Authors Rosen and Brown, for their book Leading People, compiled findings from more than a dozen studies that focused on leading companies from the Forbes 500, Fortune 500, seven hundred privately-held firms, and interviews at the three thousand largest companies in America, and Rosen and Brown found that current leadership is costing American companies more than half their human potential. To put that another way, improved leadership alone could double worker productivity. This translates directly to the bottom line. The single biggest influence on employee commitment and performance is the leadership skills of their managers.

From Harvard:

Quite simply, the better the leader, the more engaged the staff. Take, for example, results from a recent study we did on the effectiveness of 2,865 leaders in a large financial services company.

You can see a straight-line correlation here between levels of employee engagement and our measure of the overall effectiveness of their supervisors (as judged not just by the employees themselves but also by their bosses, colleagues, and other associates on 360 assessments). So, as you can see at the low end, the satisfaction, engagement, and commitment levels of employees toiling under the worst leaders (those at or below the 10th percentile) reached only the 4th percentile. (That means 96% of the company’s employees were more committed than those mumbling, grumbling, unhappy souls.) At the other end, the best leaders (those in the 90th percentile) were supervising the happiest, most engaged, and most committed employees — those happier than more than 92% of their colleagues.

*By Jack Zenger and Joseph Folkman

Employee Engagement croppedPreventative Action for the High Cost of Poor Leadership

It would be easy to deliver another twenty pages of statistics showing both the negative and positive impact of leadership. Even if some of these numbers are skewed, the impact of the high cost of poor leadership is still so significant that it warrants serious attention. I would suggest that for most companies today, a focus on improving leadership skills and creating a winning culture that engages employees is likely the single greatest area for organizational improvement, and the fastest way to decrease costs and increase profitability. The high cost of poor leadership cannot be ignored.

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What is Your Leadership Philosophy?

8D9xPlllM2WzeTfM4McZ-Tl72eJkfbmt4t8yenImKBU8NzMXDbey6A_oozMjJETcIn the past several years I have taught numerous “Advanced Leadership” workshops to groups of senior leaders from $20 million to $1 billion+ organizations. At the beginning each session I always ask the attendees how many of them currently have a written list of their key leadership values, i.e. their own “personal leadership philosophy,” that they use to guide their decisions and behaviors on a daily basis. Out of a typical group of 100 to 150 executives, only one or two will raise their hands, prompting me to wonder how in the world the others successfully lead their organizations. I just have a hard time believing that if you’ve never taken the time to truly think through what kind of leader you want to be, what your leadership values are, what sort of leadership legacy you want to leave…and then write those things down so that you have a clear and focused guide for your self-leadership…that you would be a truly effective leader of others.

One of my very favorite quotes comes from Walt Disney,

“When values are clear decisions are easy.”

Put another way, in relation to what I just wrote above,

“When values are not clear decisions are difficult.”

So, for those of you who have not yet written down your personal leadership philosophy, I challenge you to take a few hours and thoughtfully develop a focused and concise list of the key attributes, characteristics, values and behaviors that you personally want to model in order to be a living example of the kind of leader you aspire to be.

To give you some examples, based on more than 15 years of teaching my advanced leadership seminar to thousands of people all over the world, here are some of the things I hear over and over again when people describe what they feel are the most important characteristics of an “Ideal leader.”

  • Honest / integrity/ character
  • Visionary
  • Highly competent
  • Excellent communicator
  • Team player/collaborative
  • Innovative/risk taker
  • Decisive
  • Fair and supportive
  • Creates clear goals and direction
  • Respect/recognition
  • Passionate/inspiring
  • Personally accountable
  • Proactive/action oriented
  • Customer/quality focused

This list is by no means exhaustive, but it should serve as a good benchmark of what other leaders have identified as their key leadership ideals and competencies. I hope you will use this list to develop or refine your personal leadership philosophy and then use your philosophy as a touchstone to guide your actions, comments, focus and behavior.

Remember: People judge you by your actions not by your intentions and what you are speaks so loudly that they can’t hear what you say.

As a leader you live under a microscope, nothing is small, and to be effective you need to consistently lead based on your values, the organization’s values and what is in the best interests of your employees, customers, vendors and community. I believe creating a solid personal leadership philosophy will allow you to do all of that and do it well.

I very much look forward to your comments and feedback on this blog and if you find it of value I hope you’ll share it with your network.

Thanks so much – John

The Two MOST Important Leadership Imperatives

defining-it-project-successWhen I think about the key things that the people in an organization look for from their leader, there is a fairly long list, but at the top of that list are two things that are absolutely essential. The first is: Honesty. The single most important thing that people look for in a leader they would willingly follow is someone who will tell them the truth, who exhibits unquestioned integrity, who is a living example of the values they espouse and speaks with candor and transparency. If a leader is not honest, nothing else matters.

The next most important thing is what I’d like to discuss in this blog, it is the core of building a successful organization and unfortunately many leaders do not do a fully adequate job of embracing the second imperative which is creating…

  • A sharply focused and well-communicated vision, values and strategy for growth.

Please take a second and re-read that sentence, it’s only a few words but they are all extremely important.

Sharply Focused

This means being highly specific and totally clear about exactly WHAT the organization stands for, WHERE it is going and HOW you will get there. In addition, it also means you need to be highly clear and specific about what you will NOT be doing, what is NOT core, the customers you do NOT want to serve, the parts of the market you will NOT compete in and especially what sort of behaviors will NEVER be tolerated within the organization. A huge part of being an effective leader is figuring out when and where to say “No.”


Here is the key: you cannot over-communicate the vision, values or strategy – it is impossible to talk about this stuff to much. In one-on-ones, group meetings, town halls, annual reviews, in the newsletter, in emails, via voice mail, on screen savers… over and over again communicating a clear consistent message about the vision, values and strategy.

Vision and Values

The vision is a clear, vivid and compelling statement of WHERE the leader is trying to take the organization and the values are set of strongly held beliefs and social mores about HOW the people in the organization will behave along the way.

Strategy for Growth

Another simple but powerful statement…all effective strategy is:

Valued Differentiation x Execution

In other words, you must bring something unique and highly compelling to your target market and then be able to execute with discipline in delivering that value proposition consistently.

If you bring a “me too” product to the market then you will have to sell on price, and there’s always someone willing to drop their price and go out of business faster than you. If you bring something unique, but it is not highly valued by your customer…that’s called bankruptcy. And if you bring something that’s unique and compelling, but cannot execute on it, that’s also called bankruptcy. So you need all three: unique, compelling and executable.

So let me end by going back to the beginning… to be a truly effective and successful leader you must demonstrate integrity and honesty, while sharing a sharply focused and well-communicated vision, values and strategy for growth.

Sounds easy when I put it that way, but I assure you this is one of the most challenging jobs of every leader.

Free eBook Link for Building and Sustaining a Winning Culture by John Spence

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