The 7% Factor
One of the biggest reasons executives don't invest in their and their teams executive development revolves around the idea that it's difficult to measure. The lack of urgency in this area is often a result of not knowing how much it costs to not address poor leadership.
The Ken Blanchard Companies has done extensive research and discovered that poor leadership and leadership decisions cost the average business $1,000,000 a year (based upon a $15,000,000 gross revenue).
His research unearthed the 7% factor. 7% of annual revenue in an organizations is lost due to poor leadership and leadership decisions. The primary culprits were staff turnover, unproductive staff, and customer turnover. In each of these areas he identifies specific ways that weak, or non-existent, executive leadership affects the bottom line.
Here are a few more areas of impact that we have observed and helped rectify:
- Lack of clarity regarding direction, or an ever changing goal, creates busy and ineffective work.
- Poor communication, either 1:1 or in meetings, necessitates the repeating of information thus wasting the time and energy of both the communicator as well as the recipients.
- Toxic behaviours that are tolerated due to a lack of clarity around values and expectations in the organization. This results in high turnover of your best people who see the inequities but are powerless to make a change.
- Unhappy employees that erode your reputation and good will. Employees are the 'brand carriers' of your organization. When they are unhappy they don't keep it a secret. Your customers, community, and morale in your company is negatively affected.
- Increase in sick days, overtime and presenteeism from disengaged employees. (Presenteeism is the state of being at work but only physically)
- Ineffective onboarding. New hires learn from your worst employees and soon adopt the unhealthy environment. The organization has squandered one of their best opportunities to grow the culture they need to succeed.
- The 'spill over' effect of unmitigated stress on families and communities (which is difficult to measure as a mathematical formula). This is the price that innocent victims pay due to weak leadership.
While these can never be completely eradicated, the mission of the effective executive is to continuously ferret out these challenges and address them with courage and competence.