I love the irony: Sometimes it’s the leaders who complain the loudest about frivolous spending who unknowingly add the most cost to the bottom line. Years ago I learned of a great example at a southern retailer.   When its elderly (and miserly) chairman walked into his newly painted boardroom, he paused, and then said to no one in particular, “Is that the color we chose?” He then went about his board meeting. Within 48 hours, the boardroom was repainted in its original color.  The chairman had no recollection of his comment, nor did he really care, but his reaction carried an $1800 price tag.

Part of the problem occurs when leaders create a culture where they are the most important “customer” of everyone in their organization. In these companies, it’s in everyone’s best career interest to make sure the boss is happy, and to treat any request as urgent and important.   Inherent in these cultures are some unchallenged and dangerous assumptions including:

  • The leader is the smartest one in the room
  • The leader knows all of the implications of their decisions
  • The leader is more important than anyone below them

These assumptions shape everyone’s behavior, and have costly consequences that leaders rarely see.  There are many, but here are three common ones:

  1. Cost of perfect information: Phil, President of a large insurance company, built an empire based on the strength of his intellectual curiosity and obsession for detail.  Almost weekly, Phil’s scrutiny of his company gives rise to detailed questions not easily answered from existing reports.  Phil must know.  His demand for answers, always urgent and important (because its from the President) sets off what many refer to as “Phil’s weekly fire drill.”  Senior players dive into the bowels of the organization to respond.  They pull their best people off strategic projects, interrupt vacations, and demand people work well into the night, all in the interest of keeping Phil happy, adding both tangible and intangible costs that Phil never sees. And no one questions Phil or the value of the questions he asks.
  2.  Cost of unimportance:  Ann, the Chief Auditor in a highly regulated energy company, boasts that her biggest weakness is that she “doesn’t suffer fools gladly.”  Her subordinates describe her as unusually bright, but also critical, and even belittling at times.  Worse, many times people leave interactions with her feeling unimportant and discouraged.  The cost of her leadership style is high.  High performing subordinates leave, leading not only to traditional turnover costs. The less visible cost is the irreplaceable loss of company intelligence and history.  And those who remain are those with the fewest external options. They stay and endure the constant affirmation of their insignificance.  They become victims of their boss’s self-fulfilling prophecy.   People who experience themselves as inadequate begin to perform that way.  Engagement evaporates, as does any hope of people expending extra effort.
  3. Cost of dependence:  Mark is a Marketing executive in a large consumer products company.  His capacity to generate ideas is legendary.  His leadership team is in awe of his knowledge and creativity. They depend on Mark to excite and motivate their teams.  Yet marketing results are quite ordinary.  And in three years, Mark has never promoted a leader from his organization to play a more responsible role in the company.  By over-leveraging his own creativity, Mark has built an organization of dependent doobies.  In his shadow his people never learned the confidence to initiate their own ideas.  More important, they lack the fire of commitment that accompanies pride of authorship. When the boss is the only one whose ideas are worthy to pursue, the costs are found in mediocre execution and wasted effort.

Transforming costs into investments

I’ve worked with some dynamic leaders that come from a different mindset because they are aware of the broader impact of their behavior.   Instead of exercising their privilege as the organization’s most important customer, they exercise influence by interacting with employees as the key “consumers” of their leadership. They empower their organization by providing direction, reinforcement and support. This different mindset shows up in their behaviors.  These leaders tend to:

  • Ask provocative questions that produce dialogue and invite challenge
  • Uncover organizational obstacles, and hold others accountable for removing them
  • Listen deeply to all levels of employees, leaving each with a sense of trust and respect
  • Champion and challenge other’s ideas by encouraging contribution from all levels

These leaders also write blank checks, but they do so knowingly.  These checks are investments, both in their talent and in the leadership culture they are cultivating to deliver long-term results. And when these leaders review their P&L, they know their returns come from those they supported.david avatar reduced size