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How Leadership Impacts Profitability

At a gut level we know that leadership is important and necessary. As I think back over the many bosses I worked for, only a small fraction exhibited good leadership skills. And those good bosses… I still think back fondly on how they helped me along my career path. Even the good ones were far from perfect, which shows the power of leadership is not in perfection, but is in being constructive.
 
By reading these emails, you are demonstrating your commitment to being a better leader each day. Why not send along a note to the leader you enjoyed working for and telling them how much you appreciated their support and encouragement. 
 
Linking Leadership and Profitability 
 
Turns out leadership isn’t just a feel good thing. It drives the bottom line. Two interesting findings came from a studyby Dr. Rob Cook from Human Synergistics International. He measured the correlation between profit margin and how constructive the culture of the organization was.
 
A constructive culture is one where there is a sense of achievement, challenge, growth, encouragement and humanistic relationships.

The first conclusion was that organizations with a constructive culture had sustained higher profit margins. In fact the more constructive the culture, the higher the profit margin and the more stable the profit over time.
 
The second conclusion was that aggressive cultures (very task/numbers driven without support/encouragement) had the most erratic profit margins. Some years it would go way up and other years it would come crashing down. You know the story… being aggressive can yield short term gains but in the long term, people burn out and leave and the numbers drop, often costing the aggressive manager his or her job.
 
As outside observers we see obvious links between operational outcomes and the strength or weakness of the leadership. It shows up in sales, customer complaints, scrap/rework, project delays, supplier relations, grievances/complaints, past due orders, waste, excess overtime, cost and profit. Share your thoughts with me.
 
Reflection Questions
 
How constructive is the leadership culture in your organization? When you consider the managers and supervisors in your operation, is there a link between those with weak leadership skills and poor results?

Action Items
  • To get buy in from senior level decision makers, link leadership issues to the bottom line. Ask questions such as, “How much of that problem can be linked to leadership?” or, “It’s no wonder Bill is struggling, did we ever give him training on how to be a good supervisor?” 
  • Confront the unacceptable leadership behaviors and offer either training or coaching. We’ve found that only a small number of leaders are unsalvageable. Most can be turned around.
  • Measure your existing culture versus the ideal culture and develop a game plan to be more constructive. (We offer a great measurement tool from Human Synergistics to do this.)
What if the leadership issue rests with you… or your boss? If it rests with you, now is a great time to make a personal commitment to improve. If the problem rests with your boss, then take the path of making observations, asking questions that cause him or her to reflect or, if you have the guts, confront the issue head on in private.
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