The financial Cost of Inactive Leadership in business

Many of the clients I meet in my executive coaching sessions start off thinking that the soft skills of leadership aren’t as important as results.  Soft skills don’t show up on the P&L or balance sheet so aren’t as important as striving for results.

I was recently running leadership coaching sessions with a Managing Director who was avoiding a difficult conversation with one of his managers in his London office. The manager had a personnel issue in his department, someone with a bad attitude and low performance but had been around forever so was coasting. The manager had tried to address it in a hard nose, results-oriented way but no change. The manager had been taught about engaging employees so thought he needed to be nice, to be liked which wasn’t resulting in any improvement either. The Managing Director was avoiding the conversation with the manager because he didn’t have the solution.

There are two issues in this common situation that was apparent to me as it is something I see in many executive and leadership coaching sessions. Firstly, by the Managing Director avoiding a conversation he was actually costing the company money. The second issue is that the MD thought he had to have the solution before he could have the talk. 

My first step was to get him to understand that his inactive leadership was resulting in financial cost for the company, and so I started asking a series of questions:

  • When the manager has a bad discussion with the employee, how long do you think the employee stews about it after the conversation has ended? 15 minutes
  • How often do the manager and employee interact per day? At least 4 times
  • So that’s 1 hour per day or 5 hours per week
  • Let’s not even consider the lost time of any other employees that interact with this employee or witness the bad discussion.
  • What’s the bill-out rate for the employee? £100 per hour
  • How many weeks per year? 48 weeks
  • So 5 hour per week for 48 weeks at £100/hr lost
  • Is £22,500 of lost productivity worth your effort in having a conversation?

His response as I wrote this down was priceless – “you had me at 1 hour lost per day.”

In the coaching industry we call this denominating mediocracy or inaction. Most strive for Excellence.

This amount of money made it worthwhile for the Managing Director to step into positive leadership – have a conversation for which he didn’t have the solution, being vulnerable to one of his managers in hopes that together they could work it out, for the benefit of the employee and the business!!

Anne Taylor is an experienced executive and leadership coach that works with a range of London businesses. For more information on her services please call 02031 516 830.