What are the hidden costs of tolerating bad leaders?

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Print this page by Genevieve Roberts

Have you ever heard of the phrase “fish rots from the head”?  I just learned of it at a conference I was attending in Southwest Virginia so maybe that explains it.  Nonetheless, the message is clear; an organization will fail when the top leadership is not performing well.  In fact, research has shown that almost 40 percent of a company’s performance is negatively impacted by a poor leader.  So, the question is: Why do companies continue to tolerate poor leaders?

I have a few theories.  One is that organizations have a very difficult time filling top roles because there is a limited pool of talent from which to draw.  So when they do fill a role, they are willing to look the other way from the leader’s bad behaviors because they do not want the headache of trying to fill the role again.  It costs four to six times the leader’s compensation and upwards of a year or more to replace a senior level executive. 

Another theory is that leaders are doing so well in one area of their jobs that their negative behaviors do not outweigh it.  An example is a vice president of sales who consistently hits or exceeds her sales quotas but treats direct reports in a belittling and highly controlling manner.  Even if employees complain or end up leaving, I have seen cases where the leader experiences no consequences because of the risk of the potential financial impact to the organization if she were to exit.
Another theory goes something like this, “Well, we got her an executive coach, and she will come around in time; she’s really not that bad.”  Sound familiar?  Fast forward nine months. The coach has been fired, and there has been no change in the leader’s behavior.  She still is belittling and controlling.  As hard as the organization wants to believe she will get the message and change, she does not because there is often no consequence for her bad behavior.

When organizations tolerate poor leadership from senior team members they experience several costs– some blatant and some are more subtle. Some costs that organizations will suffer include:
• Higher turnover – employees don’t leave organizations, they leave their managers.
• Lower productivity – employees disengage when their manager mistreats them.
• Shrinking bench strength – the leaders run off the talent that is being groomed to succeed them. High potentials leave.
• Increased workplace complaints – workplace bullying is on the rise, and this causes more time and energy from other employees, like those in HR, who have to deal with complaints.
• More bad behavior – bad behavior left unchecked is “role modeled” by lower- level employees who guess that it must acceptable and repeat it.
• Teamwork drops – no one wants to work with this leader and employees will go to many measures to avoid doing so.

What can organizations do to respond to this issue?  First of all, the board of directors or most senior-ranking person cannot look the other way.  They must take the bully by the horns and state exactly the behavior that need to be corrected AND spell out the consequences for failing to change.  There are circumstances sometimes when the leader has never been given feedback (for fear of retaliation or that she might quit) about her behavior. 

Once notified, on some occasions the leader does change.  However, once the feedback has been delivered time and time again, then other measures must be taken that are more serious.  I encourage HR to get involved and create a development plan with the manager and her boss that very clearly spells out what behaviors/competencies are expected, how soon they must be corrected and what the consequences are for failing to follow through. 

The executive in charge must be willing to terminate the leader’s employment if no changes are made and the impact is that severe.  The leader must be willing to commit to the plan and demonstrate progress.  Organizations that are willing to face these tough people issues head-on will fare better long-term by keeping the best people.

Genevieve Roberts is a partner with the Richmond-based Titan Group LLC (http://www.titanhr.com). She can be reached at Genevieve@titanhr.com or at 804.754.8330.


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