The implications of poor leadership stretch much further than the negative impact on staff and day-to-day operations. Poor leadership can affect every avenue of your business, from employee retention to customer satisfaction, productivity and, almost always and ultimately, your finances.
The trickle-down effect of poor leadership will eventually reach your ROI. Dependent on how long the issue went ‘undiagnosed’, the negative impact could reach the tune of 7% of sales. If you make sales of $15,000,000, that’s $1,000,000 in loses.
The three key areas that poor leadership will affect are employee satisfaction, customer retention and revenue. To understand how the rot works through to the bottom end of your business, we must look at each area in more detail. From there, we will see how one feeds the other.
1. Employee Satisfaction
Employee satisfaction is up high on the list of benefits of properly handled, efficient leadership. Accounting for attracting employees, employee retention, motivation and employee morale, strong leadership is essential in keeping your operations running in a succinct and uniformed manner.
Having the wrong leaders in the wrong place can also hit the bottom line. With decreased employee morale comes the likelihood of a higher staff turnover. The costs associated with a high turnover can become a serious hole in your bucket, leading to hundreds, thousands or even millions in lost revenue.
Research carried out by the Blanchard Company shows that the cost of replacement for a low skilled worker is valued at an estimated 30% of their salary. For highly skilled workers, it could reach 250% of their salary in losses.
With costs to cover the position, rehiring and retraining, the direct financial losses can be substantial. Indirect financial losses can be attributed to a reduced workforce, more pressure on other employees, and a loss in employee morale, resulting in diminished productivity.
2. Customer Retention
Your employee satisfaction levels will directly affect your customer retention figures. Happy staff make for happy customers. Happy customers make for repeat business. Repeat business makes for a healthy ROI.
When poor leadership negatively affects your employee satisfaction and your organisation’s culture, customer retention figures can plummet. Under proper leadership, your workplace environment should breed repeat business.
With the correct leader in the right position, customer feedback and results of customer surveys will spur action. Turning negatives into positives and customer service into customer retention.
The last link in the chain to be affected by poor leadership is your revenue. Everything you do in business ultimately results in either a positive or negative effect on your revenue.
Proper leadership will strategize to optimize your revenue. Setting goals, operating sustainable practices and remaining resilient all feed into maximising your revenue results. Saratoga Institute calculated that with better leadership, losses of between 9% and 32% of voluntary turnover can be retained.
Why Plan Now?
As the pandemic has proven for many industries, resilience in the way we work keeps business on track, even in the face of disaster. By investing in your leaders, you can best prepare your business for even the bumpiest of rides.
With strong, properly trained leaders commanding your ship, the trickle-down effect should bring prosperity and power. Giving your leaders the tools they need to create a successful balance within their teams will offer promising results across your business.
Laying the foundations for a successful campaign, our leadership training courses bridge a gap between management and leadership bringing out the best possible results.