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 losses.
The key areas that poor leadership will affect are employee satisfaction, customer retention and revenue. To understand how these work 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.
Employee satisfaction is high on the 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 succinctly and uniformly.
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 our partners, The Ken 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.
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.
Customer retention figures can plummet when poor leadership negatively affects your employee satisfaction and your organisation’s culture. Under proper leadership, your workplace environment should breed repeat business.
With the correct leader in the right position, customer feedback and the 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 losses of between 9% and 32% of voluntary turnover could be retained with better leadership.
This video explains how poor leaders and managers can be detrimental to your organisation’s growth.
As the pandemic has proven for many industries, resilience in how we work keeps businesses on track, even in the face of disaster. Investing in your leaders can best prepare your business for even the bumpiest of rides.
With strong, adequately 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.