The Real Costs of Poor Management & Leadership

The Cost of Management & Leadership Shortfalls

by  Andrew Cooke, Growth & Profit Solutions

The costs and risks associated with having weak managers and leaders are often overlooked.  What does it mean to you?  How can you overcome it?  And what are the benefits of doing so?

A recent report from the UK’s Department for Business, Innovation & Skills Leadership and Management Network Group (LMNG), showed the UK’s economy has been negatively impacted by a lack of training and support for new managers.  Across 18 management practices by country the UK ranked 6th, whilst Australia ranked 9th – behind France and just ahead of Mexico.  This strongly suggests that the findings for the UK are equally applicable to the Australia and that there is a stronger sense of urgency.

John Hayes MP, UK Minister of State for Further Education, Skills, and Lifelong Learning, suggests that effective leadership is what makes the difference for successful, innovative companies. “Strong leadership and management is a key factor in fostering innovation, unlocking the potential of the workforce and ensuring organisations have the right strategies to drive productivity and growth.”

However, in the UK the research shows that effective management is the exception rather than the rule.

Too many of our organisations, both private and public, are failing to achieve their full potential: managerial shortcomings and a lack of strategic thinking are holding them back. Overcoming these weaknesses and improving our leadership and management capability is fundamental to creating a culture where more organisations have the ambition, confidence, resilience and skills to respond to the current economic challenges and compete successfully both nationally and globally.”

By providing more comprehensive management training and development for budding leaders, companies can gain the edge over competitor firms.

Key Findings of the UK Research:

  • Ineffective management is estimated to be costing UK businesses over £19billion per year in lost working hours.
  • 43% of UK managers rate their own line manager as ineffective – and only one in five are qualified.
  • Nearly three quarters of organisations in England reported a deficit of management and leadership skills in 2012, contributing to the productivity gap with countries like the US, Germany and Japan.
  • Incompetence or bad management of company directors causes 56 % of corporate failures

Quite simply, improving leadership and management capability is an issue that no organisation wishing to achieve long-term success can afford to ignore. There is no question that good leadership and management can have a truly significant impact on organisational performance, both in the immediate and longer term.

  • Best-practice management development can result in a 23% increase in organisational performance.
  • Effective management can significantly improve levels of employee engagement.
  • A single point improvement in management practices (rated on a five-point scale) is associated with the same increase in output as a 25% increase in the labour force or a 65% increase in invested capital.

Business’ long-term success is dependent on developing these management and leadership skills, these  are crucial to ensuring high performance working and business success. This is especially true as more new managers and leaders will be needed over the next decade as the number of experienced baby-boomer managers and leaders who are retiring increases.

Why are businesses underperforming when it comes to developing their talent pipeline in management and leadership?  There are a number of reasons including relatively low levels of training, shortages of key skills, the failure to apply skills strategically, and employer concern about the relevance of training provision, have also been identified as potential reasons. Other factors include difficulties in recruiting graduates with the right skills, particularly for small and medium sized companies; a perception that leadership and management skills are something you “pick up” on the job; and lack of clarity about the specific leadership and management skills and behaviours managers need to display.

Improving our leadership and management capability makes sound business sense. Helping managers at all levels to develop the right skills and behaviours will ensure organisations have the ability to adapt, innovate and evolve, and seize the growth opportunities that lie ahead.

So what are you going to do?

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

How Middle-Management is at Risk

Why middle-management is essential for business survival and the risks you run of if you lose or alienate them.

The Challenges of Middle ManagementMiddle management.  Often described as the ‘backbone’ of the company, they provide the continuity across the business and the key people for getting things done; communicating and resolving problems up, down and across the line; translating strategy into action; leading key operational areas; have considerable expertise and experience within the business; providing linkages between senior executives and front-line staff; and are implementing and responding to change.

As such, middle management is crucial to the on-going success and survival of the business.  Senior executives are starting to appreciate their role and the impact of their work, but at a time when it becoming harder to develop and retain middle management.

Middle Management Stress & Turnover

In a recent poll by Lane4 in the UK (July 2012) more than 90% of workers believed that the vast majority of workplace stress was falling on middle management, and two in five (39%) of middle management reported that they were under severe stress.  As such, many mid-level managers are dissatisfied and would like to leave their current organization.   In harder times it is those middle managers who are your best and who perform well who find it easiest to find new roles and new opportunities.

This has several impacts on your business: firstly, the business will lose its top middle management talent, this will put an increase burden on those who are left behind; secondly, the exodus of mid-level talent seriously compromises the business’ future  leadership pipeline and its ability to have the right people in the right place to enable the business to grow and develop in the future; and finally those mid-level managers remaining will be the low-performers, who are more likely to be disengaged and who have “quit and stayed”.  All of this means that business’ ability to survive and thrive – especially in challenging times – is seriously compromised.

The Impact of Mid-Management Turnover

One of the current major growth challenges facing CEOs is the lack of key talent to enable them to grow the business.  This is exacerbated with the turnover of good mid-level manager as it compromises the business’ ability to execute the CEO’s strategy and drive results and outcomes.

Furthermore, the costs of middle management turnover are also high.  A common rule of thumb is to assess the cost of a middle manager to the bottom-line at one-and-a-half to two times their annual salary.  Assuming an average salary of $125,000 then this could mean $250,000 off your bottom line.  Alternatively, look at it in terms of the extra revenue you need to achieve just to stand still – assuming your net profit is 10%, then that is a further $2.5m of revenue required!

Practically, I think this heuristic is conservative.  Once you take into account the corporate knowledge, experience, expertise and insights that have been developed over a number of years you are looking at the loss of a very valuable contributor.  Furthermore, to recruit someone who is an equivalent is both difficult and expensive to do.

Causes of Mid-Management Stress

Middle management is under increasing stress for a number of reasons.  They are the people who have to lay off staff when the company downsizes (or more cynically “right-sizes”), in an environment of poor morale, having to do more with less, with little or no increase in salary or benefits whilst being responsible for more, a reduced opportunity for career progression, dealing with people who like them are worried and scared, and frequently being seen as an “unwanted layer” and at a high risk of being laid off themselves (often having had to lay off others first).

So what do we do?

Dealing with the Problem

In challenging times we need to maintain our middle management.  In economies which are struggling the senior executives need to work with and engage with their middle management even more closely.  It is at the mid-levels that the most important projects are, and reducing their resourcing is nigh on suicidal.  If the level of responsibility for middle management is extended, and their capacity and resources is limited or reduced, then you need to invest in their developing the necessary capabilities.  If this is not done then senior management will be faced with a “frozen” middle management compounded by cycles of low morale and low engagement.

Companies need to be resilient – leaders need to provide clear direction, they need engage the middle management and rebuild trust, and in doing so enable them to engage with their reports and teams in turn.  If you cut out the middle, then you are just left with the head and tail of the business – unable to do the necessary work effectively, and a corpse all but in name.

It may seem counter-intuitive but now is the time to invest in your middle management – this will pay off in terms of loyalty, results and longer-term growth.  Treat your key people as an investment, not a cost to be cut but people to be valued, developed and through whom you can achieve leverage and significant returns.

So what are you going to do?

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Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

How Trust Drives Results

What do high-performing organizations focus on as opposed from low-performing organizations, and what differentiates how they do it?

Businesses are under pressure, there is no doubt about that – but what are businesses focusing on and why in these difficult times?  A recent report from Interaction Associates (Building Trust in 2012) found the top 3 priorities for business to be:

  1. Top line/revenue growth
  2. Profit growth
  3. Improvements to Productivity and Efficiency

No surprise here – but what is interesting is the way in which high performing organizations (those whose net profit grew more than 5% over the last year) and low-performing organizations (those under 5% over the last year or shrank) approached this.

High performing organizations focused on achieving this by focusing on the people aspects of the business, these include:

  • Customer loyalty and retention
  • Attraction, deployment, and development of talent
  • Business agility (speed, flexibility, adaptability to change)

Low-performing organizations focused on:

  • Improvements to productivity & efficiency
  • Cost reduction/becoming more efficient
  • Business agility (speed, flexibility, adaptability to change)

The focus here is more on the systems and processes to drive results and create agility, rather than having the right customers and right people to drive both revenue and profit growth (as with high performers).

So what does this mean?  Greater growth and profitability is driven by people. Systems, process improvements, and cost reductions can contribute towards growth – the only problem is that there is only so many times that you can cut the lawn before it starts to die off.  Conversely, focusing your attention on business and resources on the right customers and talent, rather than squandering it in a shotgun approach, enables you to grow the business with no limit on the upside.  For this, you need to inspire trust.

The key question then is this: are you trustworthy?  More to the point do your customers and staff think you are trustworthy?  What do you think you are – honestly?  And how would you assess how trustworthy you are? Share your thoughts here.

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Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

5 Strategies for Hard Times

5 Things to Do When Times Are Tough

When the business environment is becoming harder, here are 5 strategies to help you focus your effort, time, resources and investment.

tough times ahead Every few years the business cycle turns down and things get tough. For good business people, this is a sign to get going because with competitors struggling, it is a great time to build your business. There are two key areas you need to focus on, your survival and your growth. This paper outlines just five things you must do to make the best out of the general business downturn. Follow the suggestions made and you will not only survive, you will prosper.

1. CASH FLOW

Cash is the lifeblood of every business.  You need to get as much cash as you can into the business and protect it once you have it.

  • Where do you have cash stored? It may be with your customers who are slow in paying you. It may be in overheads that you don’t need. It may be in assets that you don’t really need to own.
  • If you had to get some money within 30 days, how much could you get in if you really put all your effort into it?
  • Look at the cash going out of your business. Can you stop spending in any areas?  Can you slow down the speed at which it goes out?

2. RETAIN YOUR PEOPLE

In most businesses that employ people you have a third of your staff that you are lucky to have, a third you would do be better without and the remaining third are somewhere in-between. In tough times you must protect your best people, the top two-thirds (maybe you need to get rid of the bottom third?).

  • How can you make sure you keep the ones you need?
  • Do they have contracts?
  • Do you reward them?
  • Do you tell them how much you appreciate their efforts?
  • Is working with you fun?

3. RETAIN YOUR CUSTOMERS

Keeping your best customers is much like keeping your best employees. Work out who the top two-thirds are and spend time on them.

  • Find out what problems they are having and what you can do to help them.
  • Keep in close contact with them on what you are doing for them.
  • Thank them for their business; ask if they can give more business.
  • Do they have any friends who they can refer you to?
  • Are you linking your best people with your best customers?
  • How can you help your customer increase their business?

4. IMPROVE YOUR PROFIT

Cash and profit are closely related. Around 20-30% of your operational expenses are due to waste in your business. You could remove that waste and the savings become instant profit (and probably cash).

  • Can you reduce your overheads? What about your people and material costs?
  • If by law you had to double your profit within three months what would you do? Why not just do it anyway?
  • Do you really know what profit you make each year? What about each month? What about each day?
  • Where do you make your profit? Did you know that 20% of your customers and 20% of your products (and services) generates 80% of your profit? Why not just focus on these customers and products for the next six months?

5. MAINTAIN YOUR ENERGY

When you are energized your business is energized. You must develop and guard your energy levels.

  • Are you fit?
  • Do you love what you do?
  • Are the people you work with fun to be with or are they energy vampires?
  • Do you work too hard?
  • Do you make time for yourself?

Time management is the biggest thing to address in tough times. 20% of what you do generates 80% of the benefit you are to your business (and family) so what are you doing for the rest of the time? Maybe if you stop doing some of the low-value stuff, you will boost your energy levels.

Getting your business under control is critical in tough times. There is no point in growing a business that does not have good cash flow, profit or leadership. Get these five things largely right and your business will grow. Every leader and every business is different, so you need to decide where to start. All five strategies are equally important and the need for discipline and accountability for them lies with everyone – the responsibility is yours, it is up to you to make it happen.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

Using the Leadership/Management Matrix to Develop Your People

Leadership and management may complement each other, but they are very different

So which is more important, management or leadership? This is not the right question to ask, rather the question to ask what is the balance between management and leadership that you need to have? To answer this, you need to at what role each plays. Management ensures the stability and efficiency necessary to run today’s business reliably. Leadership creates the change needed to take advantage of new opportunities, to avoid serious threats, and to create and execute new strategies. The point is that management and leadership are very different, and when organizations are of any size and exist in environments which are volatile, both are essential to helping them win.

The Leadership/Management Matrix

The management/leadership matrix show what happens when you have weak or strong leadership interacting with weak or strong management.  The four quadrants are:

  • Doomed – weak management, weak leadership.  Here the business is run inefficiently and with no clear direction to guide and align people’s efforts, decisions and the allocation of resources.  People are not inspired or motivated to achieve high-performance, and the business is losing to its competitors.  The business is unlikely to survive beyond the short-term.
  • Innovative – weak management, strong leadership. Here the business is able to adapt quickly and effectively, but there is insufficient management and associated skills in place to drive stability, efficiency and to create the necessary order to manage the resulting complexity and create order from which to build.
  • Well run but bureaucratic – strong management, weak leadership.  Here the business is well-structured and managed; it works efficiently which is good while the status quo exists.  However, in an environment of change it finds itself relatively rigid and inflexible with its existing bureaucracy and organization being unable to adapt effectively.  This can expose the business with existing strengths potentially becoming major liabilities, potential competitors going unrecognized or changes in customer needs going unmet.
  • Well run and innovative – strong management, strong leadership.  Here there is a healthy balance of management and leadership skills and capacity.  The business has a clear direction around which everyone and all actions are aligned, people are inspired and motivated, and as a result they work both efficiently and effectively.  They are competitive, adaptive and have the right mix of skills, capacity enabled by a strong business culture which supports the people in their work.

Look at this matrix and, for you and your team, assess their level of management and their level of leadership.  People do not need to be a manager or a leader per se, nor is it about their position in their hierarchy. Rather it is how good they are at delivering on and exemplifying the attributes got management and leadership (see the table below for ideas).

Score yourself and each of your team members on leadership and management using the following scoring range of 0 (very weak) to 10 (very strong).  The two scorings will give you each individual’s relative positioning and your own.  A good idea is to assess people yourself, then get them to self-assess, and then to share your respective findings and discuss the differences/similarities. This is a good tool to identify where and how an individual needs to develop their management and/or leadership skills. This can then be used in helping put together their personal development plan.

To view or download a PDF version of this blog click here

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

3 Steps to Help Your Managers Prepare for Difficult Conversations

In times of challenges and uncertainty, supervisors might be experiencing an increase in the number of difficult conversations with their staff. These could include delivering bad news about an employee’s job, informing staff about work restructuring, or discussing other complicated and stressful work situations.

  1. Preparing for the conversation

Before going into the conversation, ask yourself several key questions. Consult with peers, and other appropriate resources to be sure you’re comfortable with the answers.

Key questions include:

  • What is my purpose for having the conversation?
  • What do I hope to accomplish?
  • What is the ideal outcome?
  • What assumptions am I making about the other person’s reaction to the conversation?
  • What “hot buttons” exist – for me and for the other person?
  • How is my attitude toward the conversation contributing to the intended outcome?

Practice the conversation. You can mentally rehearse it in your mind, or practice it out loud with your supervisor, Employee Assistance Program, or Human Resources.

  1. Holding the conversation

A successful outcome will depend on two things: what you say and how you say it. How you approach the conversation and how you behave will greatly influence what you say and how it is perceived.

Acknowledge any emotional energy that might be fueled by the conversation. The emotional content is as important as the facts.

Keep aligned with the purpose of your conversation. Don’t be distracted by side tracks.

Suggestions for opening the conversation include:

  • “I’d like to talk to you about. . .”
  • “I want to better understand your point of view. Can we talk more about. . .”
  • “I’d like to talk about ________. I think we may have different ideas on how to ______.”

 

  1. Working Toward a Successful Outcome

Approach the conversation with an attitude of inquiry and discovery. Set aside assumptions and try to learn as much as possible about the other person’s point of view. Let the employees complete what they have to say without interruption.

Acknowledge that you’ve heard what the other person is trying to say. The best way to do this is to repeat their argument back to them. You don’t have to agree. Saying “it sounds like this issue is very important to you” doesn’t mean that you have to decide the way they’d like you to.

Advocate for your position without diminishing theirs. State your position concisely and clarify points they may not have understood.

End with problem solving. Find mutual areas where you can agree on solutions and identify what steps need to be taken. If there is no common ground, return to inquiry.

To view or download a PDF version of this blog click here

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

Five Ways to Generate Opportunities and Possibilities

There is only one way to generate real opportunities and possibilities that can take you to the next level, whatever that may be for you. And that is to take action.

Here are five ways to accelerate your ability to take action:

  1. “Try not. Do or do not. There is no try “– Yoda (Star Wars)

A great quote that makes a powerful point.  If you are going to do something, then DO it! Don’t wait around, even worse don’t say “I will” or “I can” – although they are intentional they lack intent. Intent is only apparent in action, so take action.

  1. Be Present

You can only exist in the present, and similarly you can only take action in the present. Action in the past cannot be changed, and action in the future is planning only. Take action, and do it NOW!

  1. Be Focused

Focus on what you can do and what you can influence. Don’t focus on what you cannot do or cannot control, it will only waste your time and effort and drain your motivation. Focusing on what you can do and can influence will help you gain traction and accelerate results.

  1. Visualize What You Want

This is not just wishing for something to happen. When you visualize you walk through, in your mind, every step that you are going to go through (and what will happen in each step). You don’t just imagine it – you see it, feel it, her it, touch it, and taste. Make it real in your mind.  The fact is that your brain cannot distinguish between what happens to you in real life and what you visualize in your mind. Visualizing helps you to do what needs to be done effectively when you actually take action. Practice visualizing what you are going to do which will help you get you what you want.

  1. Stop Procrastinating

Procrastinating uses and wastes your most precious resource, your time. Time once spent can never be regained. Often people procrastinate in the hope that a problem or issue will go away, or that someone else will sort it out for them. Get used to the fact that this very rarely happens, and if it does then you have abdicated any control or influence over the results that occur. Stop procrastinating and take action, this will help you generate opportunities and possibilities.

Take one of these choices now for yourself, right now, today. What is the impact of doing this for you? What have you achieved? Share your experiences here below in the comments section!

To view or download a PDF version of this blog click here

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.