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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How to Bait Your Hook

What do good anglers know which we can use in driving stronger business growth and results?

Fishing is one of the most popular leisure time pursuits in the world.  There is something about going out there, rod in hand, to capture that ever elusive fish.  This takes time, patience, skill and – let’s be honest – a bit of luck.

One thing that experienced anglers do is that they don’t waste time in an unproductive location.  You can try a few casts, change the bait, but if the fish are not biting then it is time to move on to a new spot.

We need to be like good anglers – if the fish do not bite quickly, then be prepared to move on and try elsewhere.  You might try for the same fish in another location, or using different bait or lures, or even go after another type of fish.  You want to be in a market where you will get a positive reaction as early as possible.

Doing this will save you time, money and embarrassment – it will also allow you to learn from the experience, and to apply it in future fishing spots.  What we do or how good we think something is not important.  There is only one judge out there and that is the market, and the market only cares if what you’ve done meets its needs.

The lesson here is that business is not about us, it is about our customers.  The question I like to ask to illustrate is this: “Why do people buy a quarter-inch drill?

I get a lot of answers – to hang a picture, for home improvements, to replace my old hand-drill etcetera.  They are all wrong.

The answer is simple: “To drill a quarter-inch hole!”

Customers are not interested in the features of the drill – such as its colour, whether it is turbo-charged, the special safety grip it has etcetera – they are only interested in the outcome from using it.

So if your product or service is not getting traction or garnering the sales you want then you need to do three things:

  1. Check that your product or service provides the outcomes that the customers/market need (have your hook properly baited);
  2. Be prepared to change fishing holes if the fish aren’t biting
  3. Continually learn from your experience so that you can:
  • produce a product/service that better meets the needs of the market (don’t confuse this with a better product which has more features but still fails to address the needs) and;
  • find and locate better fishing holes more quickly.

What do you do to find the right fishing holes?  How long do you wait before you move to a different location?  Are you really focused on delivering the outcomes a customer needs or delivering the product or service itself?

Share your ideas, insights and experience!  Share the knowledge, share the wealth!

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

How Learning Drives Performance

High performance is not just about achieving, but learning!

In the current environment we can no longer depend on what we have always done to achieve what we have always got. In short, we have to shift from focusing on what we achieve to focusing on how we achieve it. If you depend on behaving in the same way to get the results you want you will be sorely disappointed.  You may sustain results in the short-term, but not in the long-term.

How would it be for you if you organized your time, energy, and resources primarily around the objective of learning, instead of around performance? How would your day be different? For many people, their daily activities – what they do and how they go about doing it – would be dramatically changed.

In an environment of accelerating change we can no longer view ourselves as experts – our knowledge, experience and insights have an increasingly short shelf-life.  Rather we have to learn and challenge ourselves on an on-going basis.  Sam Walton, founder of Wal-Mart, viewed himself not as a definitive expert on retailing but as a lifelong student of his craft, always asking questions and taking every opportunity to learn. We need to do the same

Becoming a learning person certainly involves responding to every situation with learning in mind. But it involves more than that; it requires that we set ourselves explicit learning objectives. Look at your personal list of long-term objectives, your midterm objectives, and your current to-do list. How many items fall into the performance genre and how many fall into the learning genre? How many begin with the structure “My objective is to learn X,” rather than “My objective is to accomplish Y”? Most people operate off of to-do lists. They’re a useful mechanism for getting things done. A true learning person also has a “to-learn” list, and the items on that list carry at least as much weight in how one organizes his or her time as the to-do list.

There is a company in California called Granite Rock, a stone, concrete, and asphalt supplier which has institutionalized the idea of having learning goals.  Rather than having performance goals each employee is asked to set his or her annual objectives in the format:

Learn __________ so that I can __________.”

By doing this people looking to not only improve themselves in what they learn, but in how they apply it.  This is key.  If you cannot use what you have learnt then it will not help you perform. Similarly, if all you do is focus on performing then you will never learn, and if you never learn you will be unable to adapt, and if you cannot adapt you will become irrelevant and obsolete.

It is not a matter of performance or learning, it is about learning and performance where learning is the oil which, when applied, improves the performance engine. If you let the performance engine run at full throttle with no oil you will end up with a broken engine, a broken business and broken people.

My question to you is this: what are you going to do to build learning and its application into the core of your business?

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.

Creating KPIs that drive engagement & performance

How to create KPIs that drive engagement and performance

Setting KPIs

“If you can’t measure it, you can’t manage it”. 

Although this is true many companies don’t know what to measure or, if they do, they don’t know how to establish KPIs.

Why is this so important?

KPIs drive behaviour – if you know you are being evaluated against certain metrics then you will adapt how you work and how you perform.  This sounds good, but it can also be highly counter-productive, especially if you don’t know what to measure or measure the wrong thin. The result: bad management, mixed messages, confusion and employees focusing on the wrong thing.

You need to establish and develop your KPIs with care. Have too few and you may have an unbalanced “portfolio” of KPIs, have too many and it becomes a case of “everything is a priority, nothing is a priority”.

KPIs vary for different areas and different roles – but they are all underpinned by one factor: the company’s strategy and operations.  As such your KPIs are the indicator of where the company is headed. But it is also the one area that many companies mismanage as they are not thinking about how a KPI is helping the company to meet its targets.

Goals are not KPIs

A common mistake is to confuse KPIs with goals. The two are not the same.

For example, a company wants to achieve a $100 million of sales – this is often assumed to be the KPI when it is not.  In this example the KPIs there should be about the sales process. The KPIs might be about how many new customers, how many customers visited gave a repeat visitation, how many of those visits ended up in a presentation and how many of those were closed as deals. The KPI has to measure the process. You want the KPI linked to the corporate goal but it is not the goal itself.

When looking at the process you are measuring make sure that the KPIs relate to the corporate goals.  For example, having a KPI of sales reports in time does not drive sales – it only supports the process.  Furthermore every industry has formal KPIs (often found in the job description) and informal KPIs that are not written down. Like incongruent KPIs pulling in different directions, they can leave employees confused and disenchanted.

KPI is about Performance, Not People

KPIs are not about measuring people, they are about the process.  The KPIs are there to measure the performance of the organisation and KPIs are tools that people can use so that they can work not just in the business but also on the business, in other words improve the way the business works and improve its performance. They track the strategically important goals and objectives of the business.

Developing KPIs

It is absolutely critical for managers to develop the KPIs in consultation with the employee.  Developing them in isolation and imposing them on high creates, at best, a lack of buy-in and at worst total disengagement.  People want to succeed, and they want to be involved in how they succeed.

When discussing this you need to talk about three things:

  • What the person is employed for, and
  • What is going to give them satisfaction that will ensure they stay loyal and motivated; and
  • How this relates to the company’s main goals

Once there is a shared and common understanding you need to discuss the KPIs that are most effective and relevant to the processes that affect how they work and perform.  This is not to say that each individual has their own unique set of KPIs, rather that there is an agreed and understood portfolio of KPIs that complement and reinforce each other, whilst aligning the individual and team(s).

Monitoring KPIs

KPIs need constant monitoring to have relevance.  If they are measured, for example, only on a quarterly basis then it becomes like an exam.  It is viewed as being extraneous their job, rather than intrinsic. This creates a feeling of irrelevance, a lack of commitment to the KPIs and people having to be forced to comply – creating ineffective KPIs and reduced performance.

So what have you done and what are you going to do with your KPIs?  Talk to your people. Be clear on your goals, understand the key processes to be measured, and make the KPIs relevant, meaningful, measurable and review.

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

Engaging & Retaining Staff – Part 5

12 Ways to Engage & Retain Staff, Image (c) People Insight

In the first blog in this series we looked at why employee engagement is so important and provided an overview of Gallup’s findings from its extensive research.  This was summarised in the following 12 ways to engage employees.

In the second blog we examined the first 3 elements in further detail.  This included:

  1. I know what is expected of me at work.
  2. I have the right materials and equipment I need to do my work right.
  3. At work, I have the opportunity to do what I do best every day.

In the third blog we continued looking at the second triad of elements including:

4. In the last seven days, I have received recognition or praise for doing good work.

5. My supervisor, or someone at work, seems to care about me as a person.

6. There is someone at work who encourages my development.

In the fourth blog we looked at the next 3 elements:

7. At work, my opinions seem to count.
8. The mission or purpose of my company makes me feel my job is important.
9. My associates or fellow employees are committed to doing quality work.

In this blog we look at the final 3 elements:

10. I have a best friend at work.
11. In the last six months, someone has talked to me about my progress.
12. This last year, I have had opportunities at work to learn and grow.

Tenth Element – A Best Friend at Work

What does it mean?

This element is a strong predictor of performance, describing friendships which are supportive. With people it is human nature that will always win over company policy – so it is important to create, capture and leverage the power of friendships.

What is the evidence?

People look out for their friends; tolerate disagreements better, and are more likely to invite and share candid information, suggestions, and opinions, and to accept them without being threatened.  Gallup research indicates that as trust between employees increases, employee engagement increases, employee performance increases, camaraderie between employees increases, and employee happiness increases when workers report having a best friend on the job.

What should we do?

Best managers encourage friendships in the workplace by creating the conditions under which such relationships thrive.  As such managers need to get to know people in their team both individually and in terms of the dynamics that exist between them.  This then allows managers to put together people who probably could communicate, first of all, but secondly be or become friends.  To achieve this there needs to be good communication between all people, and objective criteria for the team.

Eleventh Element – Talking About Progress               

What does it mean?

Here the manager provides regular, insightful, and personal feedback to staff on both a formal and informal basis.

What is the evidence?

Staff need a clear picture or mirror of how they are performing to avoid the “Double Curse” where people ether over- or under-estimate their abilities in the following ways:

  • Self-analysis on performance is poor – people to tend to overestimate how they have done.  They lack the skill or knowledge to estimate properly – a form of unconscious incompetence.
  • Also undue modesty – people who do well know they have done well, but do not know their accomplishment is unique.  They tend to err in their estimates of others – consistently overestimating how well people do on the same test etc.

Gallup research indicates employees are more likely to believe they are compensated fairly when their manager gives them regular performance reviews. Additionally, employees who receive regular performance reviews tend to stay with the company longer and are twice as likely to tell others that their company is a great place to work.

What should we do?

Firstly, understand that the type of information that motivates a given employee, and realise that it may be different from the types that motivate others or the way that you yourself prefer.  When appraising performance for it to be effective it must be tailored for specific tasks, occupations and even personalities.

Focus on people’s strengths to stop them becoming actively disengaged, but provide constructive feedback on their weaknesses.  The appraisals are more meaningful, and perceived as more objective by staff, if they are held on a regular basis and the feedback is about relatively recent things.

Informal and on-going feedback is also important.  When discussing things with people get them to think what the options might be, don’t give them the answer right away.

A key question to ask yourself as a manager is “What can I do to improve, to coach, the person, to help him, to teach him?

Twelfth Element – Opportunities to Learn & Grow

What does it mean?

When employees feel they are learning and growing they work harder and more efficiently – this has a particular strong connection to customer engagement and profitability.

The importance of learning and growing is best appreciated when they are not there.  A lack causes frustration, and dissatisfaction as their enjoyment of work is lessened with no meaningful new challenges causes them to languish professionally and personally.

What is the evidence?

People perform when they are working toward specific difficult-to-attain targets rather than told to “do your best”.  These stretch goals are psychologically invigorating and good for business.  We need to look at the accomplishment not just in absolute terms, but also relative to what might have been and how people construe the results – especially the individual himself.

What should we do?

To match a worker with the right opportunities you need to have a deep understanding of the individual’s strengths and hopes for the future.  You need to have regular and meaningful conversations with them to develop this.

Summary
Employee engagement is crucial to retain key employees, to raising productivity and enabling the business to grow profitably.  If you don’t engage employees the best will leave, and those who are disengaged will quit and stay!
How good are you at using these 12 ways in an effective way:
Which of these 3 elements have you used and to what effect?  If you were to rank them which would you use first?  Would you use them with everyone, some of them or with no-one? What are you favourite ways or preferred ways to engage employees?
Until then share your thoughts and ideas here, and feel free to share this blog and articles with any colleagues, clients or friends you feel may find this of value. If you have any particular areas of interest you would like article on then please let me know.
Share your ideas, and share the wealth!
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Click here to find out more about Andrew Cooke and Growth & Profit Solutions.